Correlation Between Equinor ASA and Shell PLC
Can any of the company-specific risk be diversified away by investing in both Equinor ASA 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 Equinor ASA and Shell PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Equinor ASA ADR and Shell PLC ADR, you can compare the effects of market volatilities on Equinor ASA 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 Equinor ASA with a short position of Shell PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equinor ASA and Shell PLC.
Diversification Opportunities for Equinor ASA and Shell PLC
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Equinor and Shell is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Equinor ASA ADR and Shell PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shell PLC ADR and Equinor ASA 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 Equinor ASA 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 ADR has no effect on the direction of Equinor ASA i.e., Equinor ASA and Shell PLC go up and down completely randomly.
Pair Corralation between Equinor ASA and Shell PLC
Given the investment horizon of 90 days Equinor ASA ADR is expected to generate 2.06 times more return on investment than Shell PLC. However, Equinor ASA is 2.06 times more volatile than Shell PLC ADR. It trades about 0.08 of its potential returns per unit of risk. Shell PLC ADR is currently generating about 0.0 per unit of risk. If you would invest 2,398 in Equinor ASA ADR on August 23, 2024 and sell it today you would earn a total of 91.00 from holding Equinor ASA ADR or generate 3.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Equinor ASA ADR vs. Shell PLC ADR
Performance |
| Timeline |
| Equinor ASA ADR |
| Shell PLC ADR |
Equinor ASA and Shell PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equinor ASA and Shell PLC
The main advantage of trading using opposite Equinor ASA and Shell PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equinor ASA 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.| Equinor ASA vs. Shell PLC ADR | Equinor ASA vs. BP PLC ADR | Equinor ASA vs. Eni SpA ADR | Equinor ASA vs. Galp Energa |
| Shell PLC vs. Exxon Mobil Corp | Shell PLC vs. Chevron Corp | Shell PLC vs. TotalEnergies SE ADR | Shell PLC vs. Petroleo Brasileiro Petrobras |
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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