Correlation Between Shell PLC and BE Semiconductor

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

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

Diversification Opportunities for Shell PLC and BE Semiconductor

-0.75

Correlation Coefficient

Shell PLC  BE Semiconductor

Pay attention - limited upside

The 3 months correlation between Shell and BESI is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Shell PLC and BE Semiconductor Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BE Semiconductor Ind 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 BE Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BE Semiconductor Ind has no effect on the direction of Shell PLC i.e., Shell PLC and BE Semiconductor go up and down completely randomly.

Pair Corralation between Shell PLC and BE Semiconductor

Assuming the 90 days trading horizon Shell PLC is expected to generate 3.71 times less return on investment than BE Semiconductor. But when comparing it to its historical volatility, Shell PLC is 1.92 times less risky than BE Semiconductor. It trades about 0.04 of its potential returns per unit of risk. BE Semiconductor Industries is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  5,102  in BE Semiconductor Industries on February 15, 2024 and sell it today you would earn a total of  8,058  from holding BE Semiconductor Industries or generate 157.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Shell PLC  vs.  BE Semiconductor Industries

Shell PLC

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shell PLC are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain essential indicators, Shell PLC sustained solid returns over the last few months and may actually be approaching a breakup point.

BE Semiconductor Ind

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BE Semiconductor Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Shell PLC and BE Semiconductor

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

The idea behind Shell PLC and BE Semiconductor Industries 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.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.