Correlation Between Antero Midstream and Shell PLC

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

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

Diversification Opportunities for Antero Midstream and Shell PLC

-0.39

Correlation Coefficient

Antero Midstream  Shell PLC

Very good diversification

The 3 months correlation between Antero and Shell is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Antero Midstream Partners and Shell PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shell PLC ADR and Antero Midstream 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 Antero Midstream Partners 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 ADR has no effect on the direction of Antero Midstream i.e., Antero Midstream and Shell PLC go up and down completely randomly.

Pair Corralation between Antero Midstream and Shell PLC

Allowing for the 90-day total investment horizon Antero Midstream Partners is expected to generate 0.95 times more return on investment than Shell PLC. However, Antero Midstream Partners is 1.05 times less risky than Shell PLC. It trades about 0.08 of its potential returns per unit of risk. Shell PLC ADR is currently generating about -0.02 per unit of risk. If you would invest  1,361  in Antero Midstream Partners on August 7, 2024 and sell it today you would earn a total of  83.00  from holding Antero Midstream Partners or generate 6.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Antero Midstream Partners  vs.  Shell PLC ADR

Antero Midstream Partners

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Antero Midstream Partners are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Antero Midstream may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Shell PLC ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shell PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Shell PLC is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Antero Midstream and Shell PLC

The main advantage of trading using opposite Antero Midstream and Shell PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Antero Midstream 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 Antero Midstream Partners and Shell PLC ADR 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.