Correlation Between Enbridge and Brown Forman

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

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

Diversification Opportunities for Enbridge and Brown Forman

-0.5

Correlation Coefficient

Enbridge  Brown Forman

Very good diversification

The 3 months correlation between Enbridge and Brown is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge and Brown Forman in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brown Forman and Enbridge 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 Enbridge are associated (or correlated) with Brown Forman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brown Forman has no effect on the direction of Enbridge i.e., Enbridge and Brown Forman go up and down completely randomly.

Pair Corralation between Enbridge and Brown Forman

Assuming the 90 days horizon Enbridge is expected to generate 0.55 times more return on investment than Brown Forman. However, Enbridge is 1.83 times less risky than Brown Forman. It trades about 0.06 of its potential returns per unit of risk. Brown Forman is currently generating about -0.07 per unit of risk. If you would invest  3,521  in Enbridge on December 10, 2024 and sell it today you would earn a total of  339.00  from holding Enbridge or generate 9.63% return on investment over 90 days.

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

Enbridge  vs.  Brown Forman

Enbridge

Risk-Adjusted Performance

Very Weak

Over the last 90 days Enbridge has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Enbridge is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Brown Forman

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brown Forman has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Enbridge and Brown Forman

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

The idea behind Enbridge and Brown Forman 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.