Correlation Between Shell PLC and Randstad

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

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

Diversification Opportunities for Shell PLC and Randstad

-0.28

Correlation Coefficient

Shell PLC  Randstad

Very good diversification

The 3 months correlation between Shell and Randstad is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Shell PLC and Randstad NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Randstad 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 Randstad. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Randstad NV has no effect on the direction of Shell PLC i.e., Shell PLC and Randstad go up and down completely randomly.

Pair Corralation between Shell PLC and Randstad

Assuming the 90 days trading horizon Shell PLC is expected to generate 0.8 times more return on investment than Randstad. However, Shell PLC is 1.24 times less risky than Randstad. It trades about -0.05 of its potential returns per unit of risk. Randstad NV is currently generating about -0.06 per unit of risk. If you would invest  3,085  in Shell PLC on September 19, 2024 and sell it today you would lose (142.00) from holding Shell PLC or give up 4.6% of portfolio value over 90 days.

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

Shell PLC  vs.  Randstad 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.

Randstad NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Randstad NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Randstad is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Shell PLC and Randstad

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

The idea behind Shell PLC and Randstad 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.