Correlation Between Enbridge Pref and PHN Multi

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

By analyzing existing cross correlation between Enbridge Pref 13 and PHN Multi Style All Cap, you can compare the effects of market volatilities on Enbridge Pref and PHN Multi 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 PHN Multi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enbridge Pref and PHN Multi.

Diversification Opportunities for Enbridge Pref and PHN Multi

0.72

Correlation Coefficient

Enbridge Pref  PHN Multi

Poor diversification

The 3 months correlation between Enbridge and PHN is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge Pref 13 and PHN Multi Style All Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PHN Multi Style 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 13 are associated (or correlated) with PHN Multi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PHN Multi Style has no effect on the direction of Enbridge Pref i.e., Enbridge Pref and PHN Multi go up and down completely randomly.

Pair Corralation between Enbridge Pref and PHN Multi

Assuming the 90 days trading horizon Enbridge Pref is expected to generate 1.2 times less return on investment than PHN Multi. But when comparing it to its historical volatility, Enbridge Pref 13 is 1.01 times less risky than PHN Multi. It trades about 0.15 of its potential returns per unit of risk. PHN Multi Style All Cap is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  2,643  in PHN Multi Style All Cap on September 22, 2024 and sell it today you would earn a total of  226.00  from holding PHN Multi Style All Cap or generate 8.55% return on investment over 90 days.

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

Enbridge Pref 13  vs.  PHN Multi Style All Cap

Enbridge Pref 13

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge Pref 13 are ranked lower than 11 (%) 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 January 2025.

PHN Multi Style

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PHN Multi Style All Cap are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of very weak basic indicators, PHN Multi may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Enbridge Pref and PHN Multi

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

The idea behind Enbridge Pref 13 and PHN Multi Style All Cap 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.