Correlation Between Fugro NV and Shell PLC

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

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

Diversification Opportunities for Fugro NV and Shell PLC

-0.24

Correlation Coefficient

Fugro NV  Shell PLC

Very good diversification

The 3 months correlation between Fugro and Shell is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Fugro NV and Shell PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shell PLC and Fugro NV 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 Fugro NV are associated (or correlated) with Shell PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shell PLC has no effect on the direction of Fugro NV i.e., Fugro NV and Shell PLC go up and down completely randomly.

Pair Corralation between Fugro NV and Shell PLC

Assuming the 90 days trading horizon Fugro NV is expected to under-perform the Shell PLC. In addition to that, Fugro NV is 2.18 times more volatile than Shell PLC. It trades about -0.12 of its total potential returns per unit of risk. Shell PLC is currently generating about -0.03 per unit of volatility. If you would invest  3,047  in Shell PLC on September 20, 2024 and sell it today you would lose (89.00) from holding Shell PLC or give up 2.92% of portfolio value over 90 days.

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

Fugro NV  vs.  Shell PLC

Fugro NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fugro NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Shell PLC

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Fugro NV and Shell PLC

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

The idea behind Fugro NV and Shell PLC 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .