Correlation Between Associated British and Shell Plc
Can any of the company-specific risk be diversified away by investing in both Associated British 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 Associated British and Shell Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Associated British Foods and Shell plc, you can compare the effects of market volatilities on Associated British 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 Associated British with a short position of Shell Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated British and Shell Plc.
Diversification Opportunities for Associated British and Shell Plc
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Associated and Shell is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Associated British Foods and Shell plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shell plc and Associated British 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 Associated British Foods 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 Associated British i.e., Associated British and Shell Plc go up and down completely randomly.
Pair Corralation between Associated British and Shell Plc
Assuming the 90 days trading horizon Associated British is expected to generate 4.0 times less return on investment than Shell Plc. In addition to that, Associated British is 1.17 times more volatile than Shell plc. It trades about 0.0 of its total potential returns per unit of risk. Shell plc is currently generating about 0.02 per unit of volatility. If you would invest 252,024 in Shell plc on October 28, 2024 and sell it today you would earn a total of 9,976 from holding Shell plc or generate 3.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Associated British Foods vs. Shell plc
Performance |
| Timeline |
| Associated British Foods |
| Shell plc |
Associated British and Shell Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Associated British and Shell Plc
The main advantage of trading using opposite Associated British and Shell Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Associated British 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.| Associated British vs. Axway Software SA | Associated British vs. Allianz Technology Trust | Associated British vs. Roebuck Food Group | Associated British vs. Spotify Technology SA |
| Shell Plc vs. Evolution Gaming Group | Shell Plc vs. Heavitree Brewery | Shell Plc vs. Ecofin Global Utilities | Shell Plc vs. Naked Wines plc |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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