Correlation Between Eni SPA and Shell PLC
Can any of the company-specific risk be diversified away by investing in both Eni SPA 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 Eni SPA and Shell PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eni SpA ADR and Shell PLC, you can compare the effects of market volatilities on Eni SPA 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 Eni SPA with a short position of Shell PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eni SPA and Shell PLC.
Diversification Opportunities for Eni SPA and Shell PLC
Poor diversification
The 3 months correlation between Eni and Shell is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Eni SpA ADR and Shell PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shell PLC and Eni SPA 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 Eni SpA ADR 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 Eni SPA i.e., Eni SPA and Shell PLC go up and down completely randomly.
Pair Corralation between Eni SPA and Shell PLC
Taking into account the 90-day investment horizon Eni SpA ADR is expected to under-perform the Shell PLC. But the stock apears to be less risky and, when comparing its historical volatility, Eni SpA ADR is 2.4 times less risky than Shell PLC. The stock trades about -0.14 of its potential returns per unit of risk. The Shell PLC is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 3,194 in Shell PLC on August 24, 2024 and sell it today you would earn a total of 26.00 from holding Shell PLC or generate 0.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eni SpA ADR vs. Shell PLC
Performance |
| Timeline |
| Eni SpA ADR |
| Shell PLC |
Eni SPA and Shell PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eni SPA and Shell PLC
The main advantage of trading using opposite Eni SPA and Shell PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eni SPA 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.| Eni SPA vs. TotalEnergies SE ADR | Eni SPA vs. Ecopetrol SA ADR | Eni SPA vs. Shell PLC ADR | Eni SPA vs. Petroleo Brasileiro Petrobras |
| Shell PLC vs. Eni SpA | Shell PLC vs. MOL PLC ADR | Shell PLC vs. PetroChina Co Ltd | Shell PLC vs. Equinor ASA |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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