Correlation Between Shell Plc and Erste Group
Can any of the company-specific risk be diversified away by investing in both Shell Plc and Erste Group 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 Erste Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shell plc and Erste Group Bank, you can compare the effects of market volatilities on Shell Plc and Erste Group 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 Erste Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shell Plc and Erste Group.
Diversification Opportunities for Shell Plc and Erste Group
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Shell and Erste is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Shell plc and Erste Group Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Erste Group Bank 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 Erste Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Erste Group Bank has no effect on the direction of Shell Plc i.e., Shell Plc and Erste Group go up and down completely randomly.
Pair Corralation between Shell Plc and Erste Group
Assuming the 90 days trading horizon Shell plc is expected to under-perform the Erste Group. But the stock apears to be less risky and, when comparing its historical volatility, Shell plc is 1.3 times less risky than Erste Group. The stock trades about -0.14 of its potential returns per unit of risk. The Erste Group Bank is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 5,164 in Erste Group Bank on September 3, 2024 and sell it today you would earn a total of 17.00 from holding Erste Group Bank or generate 0.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shell plc vs. Erste Group Bank
Performance |
| Timeline |
| Shell plc |
| Erste Group Bank |
Shell Plc and Erste Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shell Plc and Erste Group
The main advantage of trading using opposite Shell Plc and Erste Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shell Plc position performs unexpectedly, Erste Group 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 Erste Group will offset losses from the drop in Erste Group's long position.| Shell Plc vs. Flowtech Fluidpower plc | Shell Plc vs. Fidelity National Information | Shell Plc vs. Gaztransport et Technigaz | Shell Plc vs. Teradata Corp |
| Erste Group vs. The Mercantile Investment | Erste Group vs. Schroders Investment Trusts | Erste Group vs. Hansa Investment | Erste Group vs. Taylor Maritime Investments |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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