Correlation Between Exchange Income and Enbridge Pref

Can any of the company-specific risk be diversified away by investing in both Exchange Income and Enbridge Pref 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 Exchange Income and Enbridge Pref into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Exchange Income and Enbridge Pref 1, you can compare the effects of market volatilities on Exchange Income and Enbridge Pref 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 Exchange Income with a short position of Enbridge Pref. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exchange Income and Enbridge Pref.

Diversification Opportunities for Exchange Income and Enbridge Pref

0.85

Correlation Coefficient

Exchange Income  Enbridge Pref

Very poor diversification

The 3 months correlation between Exchange and Enbridge is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Exchange Income and Enbridge Pref 1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge Pref 1 and Exchange Income 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 Exchange Income are associated (or correlated) with Enbridge Pref. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enbridge Pref 1 has no effect on the direction of Exchange Income i.e., Exchange Income and Enbridge Pref go up and down completely randomly.

Pair Corralation between Exchange Income and Enbridge Pref

Assuming the 90 days trading horizon Exchange Income is expected to generate 1.0 times less return on investment than Enbridge Pref. In addition to that, Exchange Income is 1.8 times more volatile than Enbridge Pref 1. It trades about 0.04 of its total potential returns per unit of risk. Enbridge Pref 1 is currently generating about 0.07 per unit of volatility. If you would invest  1,872  in Enbridge Pref 1 on September 30, 2024 and sell it today you would earn a total of  498.00  from holding Enbridge Pref 1 or generate 26.6% return on investment over 90 days.

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

Exchange Income  vs.  Enbridge Pref 1

Exchange Income

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Exchange Income are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Exchange Income displayed solid returns over the last few months and may actually be approaching a breakup point.

Enbridge Pref 1

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge Pref 1 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Enbridge Pref is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Exchange Income and Enbridge Pref

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

The idea behind Exchange Income and Enbridge Pref 1 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.