Correlation Between Shell PLC and Fugro NV

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

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

Diversification Opportunities for Shell PLC and Fugro NV

-0.24

Correlation Coefficient

Shell PLC  Fugro NV

Very good diversification

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

Pair Corralation between Shell PLC and Fugro NV

Assuming the 90 days trading horizon Shell PLC is expected to generate 2.26 times less return on investment than Fugro NV. But when comparing it to its historical volatility, Shell PLC is 1.65 times less risky than Fugro NV. It trades about 0.04 of its potential returns per unit of risk. Fugro NV is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,101  in Fugro NV on September 20, 2024 and sell it today you would earn a total of  564.00  from holding Fugro NV or generate 51.23% return on investment over 90 days.

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

Shell PLC  vs.  Fugro NV

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.

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.

Pair Trading with Shell PLC and Fugro NV

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

The idea behind Shell PLC and Fugro NV 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.