Correlation Between Shell PLC and SBF 120

Can any of the company-specific risk be diversified away by investing in both Shell PLC and SBF 120 at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Shell PLC and SBF 120 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shell PLC and SBF 120 Gross, you can compare the effects of market volatilities on Shell PLC and SBF 120 and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Shell PLC with a short position of SBF 120. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shell PLC and SBF 120.

Diversification Opportunities for Shell PLC and SBF 120

-0.43

Correlation Coefficient

Shell PLC  SBF 120

Very good diversification

The 3 months correlation between Shell and SBF is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Shell PLC and SBF 120 Gross in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBF 120 Gross and Shell PLC is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Shell PLC are associated (or correlated) with SBF 120. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBF 120 Gross has no effect on the direction of Shell PLC i.e., Shell PLC and SBF 120 go up and down completely randomly.

Pair Corralation between Shell PLC and SBF 120

Assuming the 90 days trading horizon Shell PLC is expected to generate 7.74 times less return on investment than SBF 120. In addition to that, Shell PLC is 1.43 times more volatile than SBF 120 Gross. It trades about 0.0 of its total potential returns per unit of risk. SBF 120 Gross is currently generating about 0.03 per unit of volatility. If you would invest  1,498,352  in SBF 120 Gross on September 5, 2024 and sell it today you would earn a total of  27,044  from holding SBF 120 Gross or generate 1.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Shell PLC  vs.  SBF 120 Gross

Pair Trading with Shell PLC and SBF 120

The main advantage of trading using opposite Shell PLC and SBF 120 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shell PLC position performs unexpectedly, SBF 120 can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in SBF 120 will offset losses from the drop in SBF 120's long position.

The idea behind Shell PLC and SBF 120 Gross pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.