Correlation Between Enbridge Pref and PrairieSky Royalty

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

Diversification Opportunities for Enbridge Pref and PrairieSky Royalty

-0.56

Correlation Coefficient

Enbridge Pref  PrairieSky Royalty

Excellent diversification

The 3 months correlation between Enbridge and PrairieSky is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge Pref 11 and PrairieSky Royalty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PrairieSky Royalty 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 PrairieSky Royalty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PrairieSky Royalty has no effect on the direction of Enbridge Pref i.e., Enbridge Pref and PrairieSky Royalty go up and down completely randomly.

Pair Corralation between Enbridge Pref and PrairieSky Royalty

Assuming the 90 days trading horizon Enbridge Pref 11 is expected to generate 0.38 times more return on investment than PrairieSky Royalty. However, Enbridge Pref 11 is 2.6 times less risky than PrairieSky Royalty. It trades about 0.2 of its potential returns per unit of risk. PrairieSky Royalty is currently generating about -0.12 per unit of risk. If you would invest  1,852  in Enbridge Pref 11 on December 2, 2024 and sell it today you would earn a total of  113.00  from holding Enbridge Pref 11 or generate 6.1% return on investment over 90 days.

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

Enbridge Pref 11  vs.  PrairieSky Royalty

Enbridge Pref 11

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge Pref 11 are ranked lower than 15 (%) 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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

PrairieSky Royalty

Risk-Adjusted Performance

Very Weak

Over the last 90 days PrairieSky Royalty has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's forward-looking signals remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Enbridge Pref and PrairieSky Royalty

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

The idea behind Enbridge Pref 11 and PrairieSky Royalty 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.