Correlation Between Enbridge Pref and Peyto ExplorationDevel

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

By analyzing existing cross correlation between Enbridge Pref 11 and Peyto ExplorationDevelopment Corp, you can compare the effects of market volatilities on Enbridge Pref and Peyto ExplorationDevel 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 Pref with a short position of Peyto ExplorationDevel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enbridge Pref and Peyto ExplorationDevel.

Diversification Opportunities for Enbridge Pref and Peyto ExplorationDevel

0.69

Correlation Coefficient

Enbridge Pref  Peyto ExplorationDevel

Poor diversification

The 3 months correlation between Enbridge and Peyto is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge Pref 11 and Peyto ExplorationDevelopment C in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peyto ExplorationDevel and Enbridge Pref 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 Pref 11 are associated (or correlated) with Peyto ExplorationDevel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peyto ExplorationDevel has no effect on the direction of Enbridge Pref i.e., Enbridge Pref and Peyto ExplorationDevel go up and down completely randomly.

Pair Corralation between Enbridge Pref and Peyto ExplorationDevel

Assuming the 90 days trading horizon Enbridge Pref is expected to generate 4.65 times less return on investment than Peyto ExplorationDevel. But when comparing it to its historical volatility, Enbridge Pref 11 is 2.47 times less risky than Peyto ExplorationDevel. It trades about 0.11 of its potential returns per unit of risk. Peyto ExplorationDevelopment Corp is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  1,381  in Peyto ExplorationDevelopment Corp on September 3, 2024 and sell it today you would earn a total of  282.00  from holding Peyto ExplorationDevelopment Corp or generate 20.42% return on investment over 90 days.

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

Enbridge Pref 11  vs.  Peyto ExplorationDevelopment C

Enbridge Pref 11

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge Pref 11 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Enbridge Pref is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Peyto ExplorationDevel

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Peyto ExplorationDevelopment Corp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Peyto ExplorationDevel displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enbridge Pref and Peyto ExplorationDevel

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

The idea behind Enbridge Pref 11 and Peyto ExplorationDevelopment 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.

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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..