Correlation Between SPEAR Investments and Shell PLC

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

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

Diversification Opportunities for SPEAR Investments and Shell PLC

-0.83

Correlation Coefficient

SPEAR Investments  Shell PLC

Pay attention - limited upside

The 3 months correlation between SPEAR and Shell is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding SPEAR Investments I and Shell PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shell PLC and SPEAR Investments 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 SPEAR Investments I 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 SPEAR Investments i.e., SPEAR Investments and Shell PLC go up and down completely randomly.

Pair Corralation between SPEAR Investments and Shell PLC

Assuming the 90 days trading horizon SPEAR Investments I is expected to under-perform the Shell PLC. But the stock apears to be less risky and, when comparing its historical volatility, SPEAR Investments I is 1.11 times less risky than Shell PLC. The stock trades about -0.12 of its potential returns per unit of risk. The Shell PLC is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,835  in Shell PLC on April 24, 2025 and sell it today you would earn a total of  248.00  from holding Shell PLC or generate 8.75% return on investment over 90 days.

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

SPEAR Investments I  vs.  Shell PLC

SPEAR Investments

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPEAR Investments I has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak 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.

Shell PLC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shell PLC are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Shell PLC may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with SPEAR Investments and Shell PLC

The main advantage of trading using opposite SPEAR Investments and Shell PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPEAR Investments 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 SPEAR Investments I 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.