Correlation Between Apple and Enbridge

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

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

Diversification Opportunities for Apple and Enbridge

-0.32

Correlation Coefficient

Apple  Enbridge

Very good diversification

The 3 months correlation between Apple and Enbridge is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc CDR and Enbridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge and Apple 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 Apple Inc CDR are associated (or correlated) with Enbridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enbridge has no effect on the direction of Apple i.e., Apple and Enbridge go up and down completely randomly.

Pair Corralation between Apple and Enbridge

Assuming the 90 days trading horizon Apple Inc CDR is expected to under-perform the Enbridge. But the stock apears to be less risky and, when comparing its historical volatility, Apple Inc CDR is 2.04 times less risky than Enbridge. The stock trades about -0.03 of its potential returns per unit of risk. The Enbridge is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,013  in Enbridge on October 24, 2024 and sell it today you would earn a total of  77.00  from holding Enbridge or generate 3.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Apple Inc CDR  vs.  Enbridge

Apple Inc CDR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Apple Inc CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Apple is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Enbridge

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Enbridge is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Apple and Enbridge

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

The idea behind Apple Inc CDR and Enbridge 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.