Correlation Between Shell PLC and Maj Invest

Can any of the company-specific risk be diversified away by investing in both Shell PLC and Maj Invest 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 Maj Invest into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shell PLC and Maj Invest , you can compare the effects of market volatilities on Shell PLC and Maj Invest 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 Maj Invest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shell PLC and Maj Invest.

Diversification Opportunities for Shell PLC and Maj Invest

-0.42

Correlation Coefficient

Shell PLC  Maj Invest

Very good diversification

The 3 months correlation between Shell and Maj is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Shell PLC and Maj Invest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maj Invest 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 Maj Invest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maj Invest has no effect on the direction of Shell PLC i.e., Shell PLC and Maj Invest go up and down completely randomly.

Pair Corralation between Shell PLC and Maj Invest

Assuming the 90 days horizon Shell PLC is expected to generate 3.55 times more return on investment than Maj Invest. However, Shell PLC is 3.55 times more volatile than Maj Invest . It trades about 0.15 of its potential returns per unit of risk. Maj Invest is currently generating about -0.12 per unit of risk. If you would invest  2,941  in Shell PLC on January 24, 2024 and sell it today you would earn a total of  696.00  from holding Shell PLC or generate 23.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Shell PLC  vs.  Maj Invest

Shell PLC

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shell PLC are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Shell PLC reported solid returns over the last few months and may actually be approaching a breakup point.

Maj Invest

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Maj Invest has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, Maj Invest is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Shell PLC and Maj Invest

The main advantage of trading using opposite Shell PLC and Maj Invest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shell PLC position performs unexpectedly, Maj Invest 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 Maj Invest will offset losses from the drop in Maj Invest's long position.

The idea behind Shell PLC and Maj Invest pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.