Correlation Between Enbridge and Newmont

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

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

Diversification Opportunities for Enbridge and Newmont

0.41

Correlation Coefficient

Enbridge  Newmont

Very weak diversification

The 3 months correlation between Enbridge and Newmont is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge and Newmont in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newmont 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 Newmont. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newmont has no effect on the direction of Enbridge i.e., Enbridge and Newmont go up and down completely randomly.

Pair Corralation between Enbridge and Newmont

Assuming the 90 days horizon Enbridge is expected to generate 0.53 times more return on investment than Newmont. However, Enbridge is 1.9 times less risky than Newmont. It trades about 0.06 of its potential returns per unit of risk. Newmont is currently generating about -0.02 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 Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Enbridge  vs.  Newmont

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.

Newmont

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Newmont are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Newmont is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Enbridge and Newmont

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

The idea behind Enbridge and Newmont 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.