Correlation Between Shell PLC and Eni SPA
Can any of the company-specific risk be diversified away by investing in both Shell PLC and Eni SPA 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 Eni SPA 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 Eni SpA ADR, you can compare the effects of market volatilities on Shell PLC and Eni SPA 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 Eni SPA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shell PLC and Eni SPA.
Diversification Opportunities for Shell PLC and Eni SPA
Very poor diversification
The 3 months correlation between Shell and Eni is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Shell PLC ADR and Eni SpA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eni SpA ADR 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 Eni SPA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eni SpA ADR has no effect on the direction of Shell PLC i.e., Shell PLC and Eni SPA go up and down completely randomly.
Pair Corralation between Shell PLC and Eni SPA
Given the investment horizon of 90 days Shell PLC ADR is expected to generate 0.97 times more return on investment than Eni SPA. However, Shell PLC ADR is 1.03 times less risky than Eni SPA. It trades about 0.11 of its potential returns per unit of risk. Eni SpA ADR is currently generating about 0.05 per unit of risk. If you would invest 6,204 in Shell PLC ADR on January 30, 2024 and sell it today you would earn a total of 1,096 from holding Shell PLC ADR or generate 17.67% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Shell PLC ADR vs. Eni SpA ADR
Performance |
Timeline |
Shell PLC ADR |
Eni SpA ADR |
Shell PLC and Eni SPA Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Shell PLC and Eni SPA
The main advantage of trading using opposite Shell PLC and Eni SPA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shell PLC position performs unexpectedly, Eni SPA 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 Eni SPA will offset losses from the drop in Eni SPA'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 |
Eni SPA vs. TotalEnergies SE ADR | Eni SPA vs. Ecopetrol SA ADR | Eni SPA vs. Shell PLC ADR | Eni SPA vs. Petroleo Brasileiro Petrobras |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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