Correlation Between Ardiden and Enbridge

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

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

Diversification Opportunities for Ardiden and Enbridge

-0.68

Correlation Coefficient

Ardiden  Enbridge

Excellent diversification

The 3 months correlation between Ardiden and Enbridge is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Ardiden Limited and Enbridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge and Ardiden 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 Ardiden Limited 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 Ardiden i.e., Ardiden and Enbridge go up and down completely randomly.

Pair Corralation between Ardiden and Enbridge

Assuming the 90 days horizon Ardiden Limited is expected to generate 27.97 times more return on investment than Enbridge. However, Ardiden is 27.97 times more volatile than Enbridge. It trades about 0.05 of its potential returns per unit of risk. Enbridge is currently generating about 0.04 per unit of risk. If you would invest  0.50  in Ardiden Limited on September 28, 2024 and sell it today you would earn a total of  0.04  from holding Ardiden Limited or generate 8.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.39%
Values	Daily Returns

Ardiden Limited  vs.  Enbridge

Ardiden Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ardiden Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Enbridge

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Enbridge is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Ardiden and Enbridge

The main advantage of trading using opposite Ardiden and Enbridge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ardiden 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 Ardiden Limited 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.