Correlation Between Enbridge Pref and PetroFrontier Corp

Can any of the company-specific risk be diversified away by investing in both Enbridge Pref and PetroFrontier Corp 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 PetroFrontier Corp 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 PetroFrontier Corp, you can compare the effects of market volatilities on Enbridge Pref and PetroFrontier Corp 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 PetroFrontier Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enbridge Pref and PetroFrontier Corp.

Diversification Opportunities for Enbridge Pref and PetroFrontier Corp

-0.83

Correlation Coefficient

Enbridge Pref  PetroFrontier Corp

Pay attention - limited upside

The 3 months correlation between Enbridge and PetroFrontier is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge Pref 11 and PetroFrontier Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroFrontier Corp 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 PetroFrontier Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PetroFrontier Corp has no effect on the direction of Enbridge Pref i.e., Enbridge Pref and PetroFrontier Corp go up and down completely randomly.

Pair Corralation between Enbridge Pref and PetroFrontier Corp

Assuming the 90 days trading horizon Enbridge Pref is expected to generate 5.59 times less return on investment than PetroFrontier Corp. But when comparing it to its historical volatility, Enbridge Pref 11 is 19.72 times less risky than PetroFrontier Corp. It trades about 0.15 of its potential returns per unit of risk. PetroFrontier Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4.00  in PetroFrontier Corp on October 10, 2024 and sell it today you would lose (1.50) from holding PetroFrontier Corp or give up 37.5% of portfolio value over 90 days.

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

Enbridge Pref 11  vs.  PetroFrontier Corp

Enbridge Pref 11

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge Pref 11 are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, Enbridge Pref may actually be approaching a critical reversion point that can send shares even higher in February 2025.

PetroFrontier Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PetroFrontier Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, PetroFrontier Corp is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Enbridge Pref and PetroFrontier Corp

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

The idea behind Enbridge Pref 11 and PetroFrontier 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .