Correlation Between Shell PLC and TotalEnergies
Can any of the company-specific risk be diversified away by investing in both Shell PLC and TotalEnergies 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 TotalEnergies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shell PLC and TotalEnergies SE ADR, you can compare the effects of market volatilities on Shell PLC and TotalEnergies 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 TotalEnergies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shell PLC and TotalEnergies.
Diversification Opportunities for Shell PLC and TotalEnergies
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Shell and TotalEnergies is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Shell PLC and TotalEnergies SE ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TotalEnergies SE ADR 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 TotalEnergies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TotalEnergies SE ADR has no effect on the direction of Shell PLC i.e., Shell PLC and TotalEnergies go up and down completely randomly.
Pair Corralation between Shell PLC and TotalEnergies
Assuming the 90 days horizon Shell PLC is expected to generate 2.11 times more return on investment than TotalEnergies. However, Shell PLC is 2.11 times more volatile than TotalEnergies SE ADR. It trades about 0.06 of its potential returns per unit of risk. TotalEnergies SE ADR is currently generating about -0.39 per unit of risk. If you would invest 3,191 in Shell PLC on August 28, 2024 and sell it today you would earn a total of 89.00 from holding Shell PLC or generate 2.79% 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. TotalEnergies SE ADR
Performance |
| Timeline |
| Shell PLC |
| TotalEnergies SE ADR |
Shell PLC and TotalEnergies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shell PLC and TotalEnergies
The main advantage of trading using opposite Shell PLC and TotalEnergies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shell PLC position performs unexpectedly, TotalEnergies 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 TotalEnergies will offset losses from the drop in TotalEnergies' long position.| Shell PLC vs. MOL PLC ADR | Shell PLC vs. PetroChina Co Ltd | Shell PLC vs. Equinor ASA | Shell PLC vs. China Petroleum Chemical |
| TotalEnergies vs. BP PLC ADR | TotalEnergies vs. Chevron Corp | TotalEnergies vs. Exxon Mobil Corp | TotalEnergies vs. Equinor ASA 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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