Correlation Between Shell PLC and Equinor ASA
Can any of the company-specific risk be diversified away by investing in both Shell PLC and Equinor ASA 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 Shell PLC and Equinor ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shell PLC and Equinor ASA, you can compare the effects of market volatilities on Shell PLC and Equinor ASA 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 Shell PLC with a short position of Equinor ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shell PLC and Equinor ASA.
Diversification Opportunities for Shell PLC and Equinor ASA
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Shell and Equinor is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Shell PLC and Equinor ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equinor ASA and Shell PLC 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 Shell PLC are associated (or correlated) with Equinor ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equinor ASA has no effect on the direction of Shell PLC i.e., Shell PLC and Equinor ASA go up and down completely randomly.
Pair Corralation between Shell PLC and Equinor ASA
Assuming the 90 days horizon Shell PLC is expected to under-perform the Equinor ASA. But the pink sheet apears to be less risky and, when comparing its historical volatility, Shell PLC is 1.17 times less risky than Equinor ASA. The pink sheet trades about 0.0 of its potential returns per unit of risk. The Equinor ASA is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 2,454 in Equinor ASA on August 23, 2024 and sell it today you would earn a total of 5.00 from holding Equinor ASA or generate 0.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shell PLC vs. Equinor ASA
Performance |
| Timeline |
| Shell PLC |
| Equinor ASA |
Shell PLC and Equinor ASA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shell PLC and Equinor ASA
The main advantage of trading using opposite Shell PLC and Equinor ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shell PLC position performs unexpectedly, Equinor ASA 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 Equinor ASA will offset losses from the drop in Equinor ASA's long position.| Shell PLC vs. Eni SpA | Shell PLC vs. MOL PLC ADR | Shell PLC vs. PetroChina Co Ltd | Shell PLC vs. Equinor ASA |
| Equinor ASA vs. Shell PLC ADR | Equinor ASA vs. Equinor ASA ADR | Equinor ASA vs. BP PLC ADR | Equinor ASA vs. Eni SpA ADR |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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