Correlation Between Coty and Shell PLC
Can any of the company-specific risk be diversified away by investing in both Coty 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 Coty and Shell PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Coty Inc and Shell PLC ADR, you can compare the effects of market volatilities on Coty 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 Coty with a short position of Shell PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coty and Shell PLC.
Diversification Opportunities for Coty and Shell PLC
Good diversification
The 3 months correlation between Coty and Shell is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Coty Inc 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 Coty 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 Coty Inc 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 Coty i.e., Coty and Shell PLC go up and down completely randomly.
Pair Corralation between Coty and Shell PLC
Given the investment horizon of 90 days Coty is expected to generate 2.67 times less return on investment than Shell PLC. In addition to that, Coty is 2.45 times more volatile than Shell PLC ADR. It trades about 0.02 of its total potential returns per unit of risk. Shell PLC ADR is currently generating about 0.16 per unit of volatility. If you would invest 6,382 in Shell PLC ADR on April 23, 2025 and sell it today you would earn a total of 733.00 from holding Shell PLC ADR or generate 11.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Coty Inc vs. Shell PLC ADR
Performance |
| Timeline |
| Coty Inc |
| Shell PLC ADR |
Coty and Shell PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coty and Shell PLC
The main advantage of trading using opposite Coty and Shell PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coty 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 Coty Inc 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.| Shell PLC vs. Exxon Mobil Corp | Shell PLC vs. Chevron Corp | Shell PLC vs. TotalEnergies SE ADR | Shell PLC vs. Petroleo Brasileiro Petrobras |
Check out your portfolio center.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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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