Correlation Between CVR Energy and Shell PLC

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

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

Diversification Opportunities for CVR Energy and Shell PLC

0.83

Correlation Coefficient

CVR Energy  Shell PLC

Very poor diversification

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

Pair Corralation between CVR Energy and Shell PLC

Considering the 90-day investment horizon CVR Energy is expected to generate 1.05 times more return on investment than Shell PLC. However, CVR Energy is 1.05 times more volatile than Shell PLC. It trades about 0.26 of its potential returns per unit of risk. Shell PLC is currently generating about 0.07 per unit of risk. If you would invest  1,673  in CVR Energy on April 26, 2025 and sell it today you would earn a total of  1,058  from holding CVR Energy or generate 63.24% return on investment over 90 days.

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

CVR Energy  vs.  Shell PLC

CVR Energy

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CVR Energy are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting basic indicators, CVR Energy demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Shell PLC

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shell PLC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Shell PLC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CVR Energy and Shell PLC

The main advantage of trading using opposite CVR Energy and Shell PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVR Energy 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 CVR Energy 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.