Correlation Between Blue Star and Enbridge

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

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

Diversification Opportunities for Blue Star and Enbridge

-0.31

Correlation Coefficient

Blue Star  Enbridge

Very good diversification

The 3 months correlation between Blue and Enbridge is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Blue Star Capital and Enbridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge and Blue Star 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 Blue Star Capital 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 Blue Star i.e., Blue Star and Enbridge go up and down completely randomly.

Pair Corralation between Blue Star and Enbridge

Assuming the 90 days trading horizon Blue Star Capital is expected to generate 7.04 times more return on investment than Enbridge. However, Blue Star is 7.04 times more volatile than Enbridge. It trades about 0.03 of its potential returns per unit of risk. Enbridge is currently generating about 0.24 per unit of risk. If you would invest  2.00  in Blue Star Capital on September 14, 2024 and sell it today you would earn a total of  0.00  from holding Blue Star Capital or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	64.62%
Values	Daily Returns

Blue Star Capital  vs.  Enbridge

Blue Star Capital

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Star Capital are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Blue Star exhibited solid returns over the last few months and may actually be approaching a breakup point.

Enbridge

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Enbridge unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Blue Star and Enbridge

The main advantage of trading using opposite Blue Star and Enbridge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blue Star 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 Blue Star Capital 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.

Check out your portfolio center.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.