Correlation Between BII Railway and Pembina Pipeline

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

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

Diversification Opportunities for BII Railway and Pembina Pipeline

-0.08

Correlation Coefficient

BII Railway  Pembina Pipeline

Good diversification

The 3 months correlation between BII and Pembina is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding BII Railway Transportation 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 BII Railway 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 BII Railway Transportation 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 BII Railway i.e., BII Railway and Pembina Pipeline go up and down completely randomly.

Pair Corralation between BII Railway and Pembina Pipeline

Assuming the 90 days horizon BII Railway is expected to generate 2.53 times less return on investment than Pembina Pipeline. In addition to that, BII Railway is 2.97 times more volatile than Pembina Pipeline Corp. It trades about 0.01 of its total potential returns per unit of risk. Pembina Pipeline Corp is currently generating about 0.05 per unit of volatility. If you would invest  2,787  in Pembina Pipeline Corp on October 15, 2024 and sell it today you would earn a total of  788.00  from holding Pembina Pipeline Corp or generate 28.27% return on investment over 90 days.

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

BII Railway Transportation  vs.  Pembina Pipeline Corp

BII Railway Transpor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BII Railway Transportation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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 newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with BII Railway and Pembina Pipeline

The main advantage of trading using opposite BII Railway and Pembina Pipeline positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BII Railway 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 BII Railway Transportation 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.