Correlation Between Enbridge and John Wood

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

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

Diversification Opportunities for Enbridge and John Wood

0.17

Correlation Coefficient

Enbridge  John Wood

Average diversification

The 3 months correlation between Enbridge and John is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge and John Wood Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on John Wood Group and Enbridge 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 Enbridge are associated (or correlated) with John Wood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of John Wood Group has no effect on the direction of Enbridge i.e., Enbridge and John Wood go up and down completely randomly.

Pair Corralation between Enbridge and John Wood

Assuming the 90 days trading horizon Enbridge is expected to generate 0.15 times more return on investment than John Wood. However, Enbridge is 6.88 times less risky than John Wood. It trades about 0.12 of its potential returns per unit of risk. John Wood Group is currently generating about -0.02 per unit of risk. If you would invest  5,917  in Enbridge on December 25, 2024 and sell it today you would earn a total of  391.00  from holding Enbridge or generate 6.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	63.93%
Values	Daily Returns

Enbridge  vs.  John Wood Group

Enbridge

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Enbridge may actually be approaching a critical reversion point that can send shares even higher in April 2025.

John Wood Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days John Wood Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Enbridge and John Wood

The main advantage of trading using opposite Enbridge and John Wood positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enbridge position performs unexpectedly, John Wood 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 John Wood will offset losses from the drop in John Wood's long position.

The idea behind Enbridge and John Wood Group 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.