Correlation Between PetroChina and Shell PLC
Can any of the company-specific risk be diversified away by investing in both PetroChina 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 PetroChina and Shell PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PetroChina Co Ltd and Shell PLC ADR, you can compare the effects of market volatilities on PetroChina 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 PetroChina with a short position of Shell PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of PetroChina and Shell PLC.
Diversification Opportunities for PetroChina and Shell PLC
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between PetroChina and Shell is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd 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 PetroChina 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 PetroChina Co Ltd 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 PetroChina i.e., PetroChina and Shell PLC go up and down completely randomly.
Pair Corralation between PetroChina and Shell PLC
Assuming the 90 days horizon PetroChina Co Ltd is expected to under-perform the Shell PLC. In addition to that, PetroChina is 2.54 times more volatile than Shell PLC ADR. It trades about -0.13 of its total potential returns per unit of risk. Shell PLC ADR is currently generating about 0.03 per unit of volatility. If you would invest 6,583 in Shell PLC ADR on August 24, 2024 and sell it today you would earn a total of 44.00 from holding Shell PLC ADR or generate 0.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PetroChina Co Ltd vs. Shell PLC ADR
Performance |
| Timeline |
| PetroChina |
| Shell PLC ADR |
PetroChina and Shell PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PetroChina and Shell PLC
The main advantage of trading using opposite PetroChina and Shell PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PetroChina 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.| PetroChina vs. Equinor ASA | PetroChina vs. Origin Energy Ltd | PetroChina vs. Shell PLC | PetroChina vs. Eni SpA ADR |
| 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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