Correlation Between Element Fleet and Pembina Pipeline

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

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

Diversification Opportunities for Element Fleet and Pembina Pipeline

0.01

Correlation Coefficient

Element Fleet  Pembina Pipeline

Significant diversification

The 3 months correlation between Element and Pembina is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Element Fleet Management 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 Element Fleet 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 Element Fleet Management 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 Element Fleet i.e., Element Fleet and Pembina Pipeline go up and down completely randomly.

Pair Corralation between Element Fleet and Pembina Pipeline

Assuming the 90 days trading horizon Element Fleet Management is expected to generate 1.62 times more return on investment than Pembina Pipeline. However, Element Fleet is 1.62 times more volatile than Pembina Pipeline Corp. It trades about 0.08 of its potential returns per unit of risk. Pembina Pipeline Corp is currently generating about 0.08 per unit of risk. If you would invest  2,568  in Element Fleet Management on October 10, 2024 and sell it today you would earn a total of  313.00  from holding Element Fleet Management or generate 12.19% return on investment over 90 days.

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

Element Fleet Management  vs.  Pembina Pipeline Corp

Element Fleet Management

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Element Fleet Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Element Fleet is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pembina Pipeline Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pembina Pipeline Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, Pembina Pipeline is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Element Fleet and Pembina Pipeline

The main advantage of trading using opposite Element Fleet and Pembina Pipeline positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Element Fleet 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 Element Fleet Management 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.