Correlation Between Chemtrade Logistics and Enbridge Pref

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

By analyzing existing cross correlation between Chemtrade Logistics Income and Enbridge Pref 7, you can compare the effects of market volatilities on Chemtrade Logistics and Enbridge Pref 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 Chemtrade Logistics with a short position of Enbridge Pref. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chemtrade Logistics and Enbridge Pref.

Diversification Opportunities for Chemtrade Logistics and Enbridge Pref

-0.56

Correlation Coefficient

Chemtrade Logistics  Enbridge Pref

Excellent diversification

The 3 months correlation between Chemtrade and Enbridge is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Chemtrade Logistics Income and Enbridge Pref 7 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge Pref 7 and Chemtrade Logistics 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 Chemtrade Logistics Income are associated (or correlated) with Enbridge Pref. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enbridge Pref 7 has no effect on the direction of Chemtrade Logistics i.e., Chemtrade Logistics and Enbridge Pref go up and down completely randomly.

Pair Corralation between Chemtrade Logistics and Enbridge Pref

Assuming the 90 days trading horizon Chemtrade Logistics is expected to generate 1.02 times less return on investment than Enbridge Pref. In addition to that, Chemtrade Logistics is 2.39 times more volatile than Enbridge Pref 7. It trades about 0.04 of its total potential returns per unit of risk. Enbridge Pref 7 is currently generating about 0.11 per unit of volatility. If you would invest  1,462  in Enbridge Pref 7 on September 30, 2024 and sell it today you would earn a total of  563.00  from holding Enbridge Pref 7 or generate 38.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Chemtrade Logistics Income  vs.  Enbridge Pref 7

Chemtrade Logistics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chemtrade Logistics Income has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Chemtrade Logistics is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Enbridge Pref 7

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enbridge Pref 7 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Enbridge Pref is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Chemtrade Logistics and Enbridge Pref

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

The idea behind Chemtrade Logistics Income and Enbridge Pref 7 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.