Correlation Between Shell PLC and Galp Energia
Can any of the company-specific risk be diversified away by investing in both Shell PLC and Galp Energia 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 Galp Energia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shell PLC ADR and Galp Energia SGPS, you can compare the effects of market volatilities on Shell PLC and Galp Energia 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 Galp Energia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shell PLC and Galp Energia.
Diversification Opportunities for Shell PLC and Galp Energia
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Shell and Galp is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Shell PLC ADR and Galp Energia SGPS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Galp Energia SGPS 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 ADR are associated (or correlated) with Galp Energia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Galp Energia SGPS has no effect on the direction of Shell PLC i.e., Shell PLC and Galp Energia go up and down completely randomly.
Pair Corralation between Shell PLC and Galp Energia
Given the investment horizon of 90 days Shell PLC ADR is expected to generate 0.43 times more return on investment than Galp Energia. However, Shell PLC ADR is 2.35 times less risky than Galp Energia. It trades about -0.01 of its potential returns per unit of risk. Galp Energia SGPS is currently generating about -0.23 per unit of risk. If you would invest 6,535 in Shell PLC ADR on August 27, 2024 and sell it today you would lose (30.00) from holding Shell PLC ADR or give up 0.46% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shell PLC ADR vs. Galp Energia SGPS
Performance |
| Timeline |
| Shell PLC ADR |
| Galp Energia SGPS |
Shell PLC and Galp Energia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shell PLC and Galp Energia
The main advantage of trading using opposite Shell PLC and Galp Energia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shell PLC position performs unexpectedly, Galp Energia 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 Galp Energia will offset losses from the drop in Galp Energia's long position.| Shell PLC vs. Exxon Mobil Corp | Shell PLC vs. Chevron Corp | Shell PLC vs. TotalEnergies SE ADR | Shell PLC vs. Petroleo Brasileiro Petrobras |
| Galp Energia vs. Equinor ASA ADR | Galp Energia vs. TotalEnergies SE ADR | Galp Energia vs. Ecopetrol SA ADR | Galp Energia vs. National Fuel Gas |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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