Correlation Between Northrop Grumman and SHELL PLC
Can any of the company-specific risk be diversified away by investing in both Northrop Grumman 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 Northrop Grumman and SHELL PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northrop Grumman and SHELL PLC WI, you can compare the effects of market volatilities on Northrop Grumman 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 Northrop Grumman with a short position of SHELL PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northrop Grumman and SHELL PLC.
Diversification Opportunities for Northrop Grumman and SHELL PLC
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Northrop and SHELL is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Northrop Grumman and SHELL PLC WI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SHELL PLC WI and Northrop Grumman 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 Northrop Grumman 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 WI has no effect on the direction of Northrop Grumman i.e., Northrop Grumman and SHELL PLC go up and down completely randomly.
Pair Corralation between Northrop Grumman and SHELL PLC
Assuming the 90 days horizon Northrop Grumman is expected to under-perform the SHELL PLC. In addition to that, Northrop Grumman is 1.2 times more volatile than SHELL PLC WI. It trades about -0.11 of its total potential returns per unit of risk. SHELL PLC WI is currently generating about 0.08 per unit of volatility. If you would invest 6,131 in SHELL PLC WI on August 24, 2024 and sell it today you would earn a total of 119.00 from holding SHELL PLC WI or generate 1.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northrop Grumman vs. SHELL PLC WI
Performance |
| Timeline |
| Northrop Grumman |
| SHELL PLC WI |
Northrop Grumman and SHELL PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northrop Grumman and SHELL PLC
The main advantage of trading using opposite Northrop Grumman and SHELL PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northrop Grumman 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.| Northrop Grumman vs. Entravision Communications | Northrop Grumman vs. CyberArk Software | Northrop Grumman vs. LION ONE METALS | Northrop Grumman vs. Guidewire Software |
| SHELL PLC vs. Airbus SE | SHELL PLC vs. Airbus SE | SHELL PLC vs. Origin Agritech | SHELL PLC vs. SIVERS SEMICONDUCTORS AB |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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