Correlation Between Alumina Limited and Enbridge

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

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

Diversification Opportunities for Alumina Limited and Enbridge

-0.53

Correlation Coefficient

Alumina Limited  Enbridge

Excellent diversification

The 3 months correlation between Alumina and Enbridge is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Alumina Limited PK and Enbridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge and Alumina Limited 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 Alumina Limited PK 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 Alumina Limited i.e., Alumina Limited and Enbridge go up and down completely randomly.

Pair Corralation between Alumina Limited and Enbridge

Assuming the 90 days horizon Alumina Limited PK is expected to under-perform the Enbridge. In addition to that, Alumina Limited is 1.29 times more volatile than Enbridge. It trades about 0.0 of its total potential returns per unit of risk. Enbridge is currently generating about 0.04 per unit of volatility. If you would invest  1,703  in Enbridge on September 28, 2024 and sell it today you would earn a total of  543.00  from holding Enbridge or generate 31.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	80.08%
Values	Daily Returns

Alumina Limited PK  vs.  Enbridge

Alumina Limited PK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alumina Limited PK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, Alumina Limited is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 Alumina Limited and Enbridge

The main advantage of trading using opposite Alumina Limited and Enbridge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alumina Limited 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 Alumina Limited PK 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.