Correlation Between Diamond Estates and Pembina Pipeline

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

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

Diversification Opportunities for Diamond Estates and Pembina Pipeline

-0.38

Correlation Coefficient

Diamond Estates  Pembina Pipeline

Very good diversification

The 3 months correlation between Diamond and Pembina is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Estates Wines 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 Diamond Estates 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 Diamond Estates Wines 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 Diamond Estates i.e., Diamond Estates and Pembina Pipeline go up and down completely randomly.

Pair Corralation between Diamond Estates and Pembina Pipeline

Assuming the 90 days horizon Diamond Estates Wines is expected to under-perform the Pembina Pipeline. In addition to that, Diamond Estates is 2.6 times more volatile than Pembina Pipeline Corp. It trades about -0.06 of its total potential returns per unit of risk. Pembina Pipeline Corp is currently generating about 0.13 per unit of volatility. If you would invest  5,191  in Pembina Pipeline Corp on December 21, 2024 and sell it today you would earn a total of  533.00  from holding Pembina Pipeline Corp or generate 10.27% return on investment over 90 days.

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

Diamond Estates Wines  vs.  Pembina Pipeline Corp

Diamond Estates Wines

Risk-Adjusted Performance

Very Weak

Over the last 90 days Diamond Estates Wines has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pembina Pipeline Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pembina Pipeline Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal essential indicators, Pembina Pipeline may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Diamond Estates and Pembina Pipeline

The main advantage of trading using opposite Diamond Estates and Pembina Pipeline positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diamond Estates 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 Diamond Estates Wines 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.

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 Transaction History module to view history of all your transactions and understand their impact on performance.