It involves momentum. You can jump out of SS whenever you want. However, the more momentum you have, the farther you will go. It seems SS builds momentum over time up until the last frame when squirtle is completely out. This means, ideally, you want to jump out of the last from of the SS and cancel that jump into a grab.
Note that you can slide the same distance as a JC grab, if not more, with a side-smash out of SS.
This is done by SS > C-stick left/right + hold Z to charge. Again, ideally, you want to start the smash's charging on the last frame of the SS so you have the max momentum possible. Remember, the momentum correlates directly with how far you slide out of the SS. If you dont want to slide much, JC grab or fsmash on the first frames of SS. If you DO JC grab or fsmash on the last frame, you will be moving most of the length of FD.
An earlier post in this thread that I made:
Water gun is a great jab-reset imo. Since it hits multiple times the opponent will usually have the getup bypassed. Also squirtle is my new main, his movement is just so sexy. Also, also anyone else notice that if you shellshift and dash in the new direction you can do a jc-boost pivot grab that covers 3/4 of dreamland's bottom platform?
This has nothing to do with dash out of shellshift. What actually is happening is a momentum boost. During shellshift you are always building momentum, until the very last frame (or so it feels). If you JC grab out of the last frame of the shell shift then you will likely get the same effect you are describing.
You can also charge a smash the same way. Up/down smash dont slide, but side smash does.
Run > shellshift > left/right c-stick + hold z > release when ready. You will move the same distance you described earlier, sliding all the while.