Correlation Between DIRTT Environmental and Pembina Pipeline

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

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

Diversification Opportunities for DIRTT Environmental and Pembina Pipeline

-0.08

Correlation Coefficient

DIRTT Environmental  Pembina Pipeline

Good diversification

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

Pair Corralation between DIRTT Environmental and Pembina Pipeline

Assuming the 90 days trading horizon DIRTT Environmental Solutions is expected to generate 6.07 times more return on investment than Pembina Pipeline. However, DIRTT Environmental is 6.07 times more volatile than Pembina Pipeline Corp. It trades about 0.07 of its potential returns per unit of risk. Pembina Pipeline Corp is currently generating about 0.14 per unit of risk. If you would invest  51.00  in DIRTT Environmental Solutions on October 5, 2024 and sell it today you would earn a total of  54.00  from holding DIRTT Environmental Solutions or generate 105.88% return on investment over 90 days.

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

DIRTT Environmental Solutions  vs.  Pembina Pipeline Corp

DIRTT Environmental

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DIRTT Environmental Solutions are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, DIRTT Environmental displayed 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. In spite of latest abnormal performance, the Stock's essential indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with DIRTT Environmental and Pembina Pipeline

The main advantage of trading using opposite DIRTT Environmental and Pembina Pipeline positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DIRTT Environmental 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 DIRTT Environmental Solutions 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.