Correlation Between Compania and Shell PLC

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

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

Diversification Opportunities for Compania and Shell PLC

0.65

Correlation Coefficient

Compania  Shell PLC

Poor diversification

The 3 months correlation between Compania and Shell is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Compania de Minas and Shell PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shell PLC and Compania 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 Compania de Minas 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 Compania i.e., Compania and Shell PLC go up and down completely randomly.

Pair Corralation between Compania and Shell PLC

Considering the 90-day investment horizon Compania de Minas is expected to generate 0.75 times more return on investment than Shell PLC. However, Compania de Minas is 1.33 times less risky than Shell PLC. It trades about 0.14 of its potential returns per unit of risk. Shell PLC is currently generating about 0.04 per unit of risk. If you would invest  1,504  in Compania de Minas on May 7, 2025 and sell it today you would earn a total of  286.00  from holding Compania de Minas or generate 19.02% return on investment over 90 days.

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

Compania de Minas  vs.  Shell PLC

Compania de Minas

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Compania de Minas are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Compania displayed solid returns over the last few months and may actually be approaching a breakup point.

Shell PLC

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Shell PLC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Shell PLC may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Compania and Shell PLC

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

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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 Anywhere module to track or share privately all of your investments from the convenience of any device.