Correlation Between Shell PLC and Suncor Energy
Can any of the company-specific risk be diversified away by investing in both Shell PLC and Suncor Energy 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 Suncor Energy 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 Suncor Energy, you can compare the effects of market volatilities on Shell PLC and Suncor Energy 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 Suncor Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shell PLC and Suncor Energy.
Diversification Opportunities for Shell PLC and Suncor Energy
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Shell and Suncor is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Shell PLC ADR and Suncor Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suncor Energy 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 Suncor Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suncor Energy has no effect on the direction of Shell PLC i.e., Shell PLC and Suncor Energy go up and down completely randomly.
Pair Corralation between Shell PLC and Suncor Energy
Given the investment horizon of 90 days Shell PLC is expected to generate 6.65 times less return on investment than Suncor Energy. But when comparing it to its historical volatility, Shell PLC ADR is 1.35 times less risky than Suncor Energy. It trades about 0.02 of its potential returns per unit of risk. Suncor Energy is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 3,807 in Suncor Energy on August 30, 2024 and sell it today you would earn a total of 148.00 from holding Suncor Energy or generate 3.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shell PLC ADR vs. Suncor Energy
Performance |
| Timeline |
| Shell PLC ADR |
| Suncor Energy |
Shell PLC and Suncor Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shell PLC and Suncor Energy
The main advantage of trading using opposite Shell PLC and Suncor Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shell PLC position performs unexpectedly, Suncor Energy 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 Suncor Energy will offset losses from the drop in Suncor Energy'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 |
| Suncor Energy vs. Imperial Oil | Suncor Energy vs. Ecopetrol SA ADR | Suncor Energy vs. Petroleo Brasileiro Petrobras | Suncor Energy 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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