Correlation Between Cheniere Energy and Pembina Pipeline

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

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

Diversification Opportunities for Cheniere Energy and Pembina Pipeline

0.09

Correlation Coefficient

Cheniere Energy  Pembina Pipeline

Significant diversification

The 3 months correlation between Cheniere and Pembina is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Cheniere Energy and Pembina Pipeline Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pembina Pipeline Corp and Cheniere Energy 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 Cheniere Energy are associated (or correlated) with Pembina Pipeline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pembina Pipeline Corp has no effect on the direction of Cheniere Energy i.e., Cheniere Energy and Pembina Pipeline go up and down completely randomly.

Pair Corralation between Cheniere Energy and Pembina Pipeline

Assuming the 90 days trading horizon Cheniere Energy is expected to generate 1.0 times more return on investment than Pembina Pipeline. However, Cheniere Energy is 1.0 times less risky than Pembina Pipeline. It trades about -0.23 of its potential returns per unit of risk. Pembina Pipeline Corp is currently generating about -0.42 per unit of risk. If you would invest  21,140  in Cheniere Energy on September 22, 2024 and sell it today you would lose (1,545) from holding Cheniere Energy or give up 7.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Cheniere Energy  vs.  Pembina Pipeline Corp

Cheniere Energy

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cheniere Energy are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Cheniere Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pembina Pipeline Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pembina Pipeline Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Pembina Pipeline is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Cheniere Energy and Pembina Pipeline

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

The idea behind Cheniere Energy and Pembina Pipeline Corp 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.