Correlation Between Transportadora and Shell PLC

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

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

Diversification Opportunities for Transportadora and Shell PLC

-0.64

Correlation Coefficient

Transportadora  Shell PLC

Excellent diversification

The 3 months correlation between Transportadora and Shell is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Transportadora de Gas 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 Transportadora 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 Transportadora de Gas 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 Transportadora i.e., Transportadora and Shell PLC go up and down completely randomly.

Pair Corralation between Transportadora and Shell PLC

Considering the 90-day investment horizon Transportadora de Gas is expected to generate 2.49 times more return on investment than Shell PLC. However, Transportadora is 2.49 times more volatile than Shell PLC ADR. It trades about 0.25 of its potential returns per unit of risk. Shell PLC ADR is currently generating about -0.17 per unit of risk. If you would invest  2,088  in Transportadora de Gas on September 23, 2024 and sell it today you would earn a total of  687.00  from holding Transportadora de Gas or generate 32.9% return on investment over 90 days.

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

Transportadora de Gas  vs.  Shell PLC ADR

Transportadora de Gas

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Transportadora de Gas are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Transportadora unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 latest unfluctuating performance, the Stock's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Transportadora and Shell PLC

The main advantage of trading using opposite Transportadora and Shell PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transportadora 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 Transportadora de Gas 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.