Correlation Between Enbridge and Shell Plc
Can any of the company-specific risk be diversified away by investing in both Enbridge and Shell Plc 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 Enbridge and Shell Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Enbridge and Shell plc, you can compare the effects of market volatilities on Enbridge and Shell Plc 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 Enbridge with a short position of Shell Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enbridge and Shell Plc.
Diversification Opportunities for Enbridge and Shell Plc
Good diversification
The 3 months correlation between Enbridge and Shell is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge and Shell plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shell plc and Enbridge 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 Enbridge are associated (or correlated) with Shell Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shell plc has no effect on the direction of Enbridge i.e., Enbridge and Shell Plc go up and down completely randomly.
Pair Corralation between Enbridge and Shell Plc
Assuming the 90 days trading horizon Enbridge is expected to generate 1.08 times more return on investment than Shell Plc. However, Enbridge is 1.08 times more volatile than Shell plc. It trades about 0.43 of its potential returns per unit of risk. Shell plc is currently generating about 0.07 per unit of risk. If you would invest 5,541 in Enbridge on August 31, 2024 and sell it today you would earn a total of 459.00 from holding Enbridge or generate 8.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 69.57% |
| Values | Daily Returns |
Enbridge vs. Shell plc
Performance |
| Timeline |
| Enbridge |
| Shell plc |
Enbridge and Shell Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Enbridge and Shell Plc
The main advantage of trading using opposite Enbridge and Shell Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enbridge position performs unexpectedly, Shell Plc 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 Shell Plc will offset losses from the drop in Shell Plc's long position.| Enbridge vs. Fevertree Drinks Plc | Enbridge vs. Schroders Investment Trusts | Enbridge vs. Axfood AB | Enbridge vs. Kinnevik Investment AB |
| Shell Plc vs. Hansa Investment | Shell Plc vs. Beeks Trading | Shell Plc vs. Schroders Investment Trusts | Shell Plc vs. Molson Coors Beverage |
Check out your portfolio center.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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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