Correlation Between Shell PLC and Aim Treasurers

Can any of the company-specific risk be diversified away by investing in both Shell PLC and Aim Treasurers 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 Aim Treasurers 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 Aim Treasurers Series, you can compare the effects of market volatilities on Shell PLC and Aim Treasurers 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 Aim Treasurers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shell PLC and Aim Treasurers.

Diversification Opportunities for Shell PLC and Aim Treasurers

0.74

Correlation Coefficient

Shell PLC  Aim Treasurers

Poor diversification

The 3 months correlation between Shell and Aim is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Shell PLC ADR and Aim Treasurers Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aim Treasurers Series 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 Aim Treasurers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aim Treasurers Series has no effect on the direction of Shell PLC i.e., Shell PLC and Aim Treasurers go up and down completely randomly.

Pair Corralation between Shell PLC and Aim Treasurers

Given the investment horizon of 90 days Shell PLC ADR is expected to generate 6.01 times more return on investment than Aim Treasurers. However, Shell PLC is 6.01 times more volatile than Aim Treasurers Series. It trades about 0.14 of its potential returns per unit of risk. Aim Treasurers Series is currently generating about 0.16 per unit of risk. If you would invest  6,494  in Shell PLC ADR on January 20, 2024 and sell it today you would earn a total of  713.00  from holding Shell PLC ADR or generate 10.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.78%
Values	Daily Returns

Shell PLC ADR  vs.  Aim Treasurers Series

Shell PLC ADR

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shell PLC ADR are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating technical and fundamental indicators, Shell PLC disclosed solid returns over the last few months and may actually be approaching a breakup point.

Aim Treasurers Series

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aim Treasurers Series are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Aim Treasurers is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Shell PLC and Aim Treasurers

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

The idea behind Shell PLC ADR and Aim Treasurers Series 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.