Correlation Between Shell PLC and Koninklijke Philips

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

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

Diversification Opportunities for Shell PLC and Koninklijke Philips

-0.39

Correlation Coefficient

Shell PLC  Koninklijke Philips

Very good diversification

The 3 months correlation between Shell and Koninklijke is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Shell PLC and Koninklijke Philips NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Koninklijke Philips 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 Koninklijke Philips. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Koninklijke Philips has no effect on the direction of Shell PLC i.e., Shell PLC and Koninklijke Philips go up and down completely randomly.

Pair Corralation between Shell PLC and Koninklijke Philips

Assuming the 90 days trading horizon Shell PLC is expected to generate 0.69 times more return on investment than Koninklijke Philips. However, Shell PLC is 1.45 times less risky than Koninklijke Philips. It trades about 0.11 of its potential returns per unit of risk. Koninklijke Philips NV is currently generating about 0.05 per unit of risk. If you would invest  2,824  in Shell PLC on April 21, 2025 and sell it today you would earn a total of  216.00  from holding Shell PLC or generate 7.65% 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.  Koninklijke Philips NV

Shell PLC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shell PLC are ranked lower than 8 (%) 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.

Koninklijke Philips

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Koninklijke Philips NV are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Koninklijke Philips 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 Koninklijke Philips

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

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