Correlation Between Enbridge Pref and Tourmaline Oil

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

Diversification Opportunities for Enbridge Pref and Tourmaline Oil

0.64

Correlation Coefficient

Enbridge Pref  Tourmaline Oil

Poor diversification

The 3 months correlation between Enbridge and Tourmaline is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge Pref 11 and Tourmaline Oil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tourmaline Oil 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 Tourmaline Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tourmaline Oil Corp has no effect on the direction of Enbridge Pref i.e., Enbridge Pref and Tourmaline Oil go up and down completely randomly.

Pair Corralation between Enbridge Pref and Tourmaline Oil

Assuming the 90 days trading horizon Enbridge Pref is expected to generate 3.48 times less return on investment than Tourmaline Oil. But when comparing it to its historical volatility, Enbridge Pref 11 is 3.07 times less risky than Tourmaline Oil. It trades about 0.07 of its potential returns per unit of risk. Tourmaline Oil Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  6,058  in Tourmaline Oil Corp on August 30, 2024 and sell it today you would earn a total of  506.00  from holding Tourmaline Oil Corp or generate 8.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Enbridge Pref 11  vs.  Tourmaline Oil Corp

Enbridge Pref 11

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge Pref 11 are ranked lower than 5 (%) 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.

Tourmaline Oil Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tourmaline Oil Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Tourmaline Oil may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Enbridge Pref and Tourmaline Oil

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

The idea behind Enbridge Pref 11 and Tourmaline Oil 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.

Check out your portfolio center.

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 Equity Valuation module to check real value of public entities based on technical and fundamental data.