Correlation Between Enbridge Pref and Air Canada

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

Diversification Opportunities for Enbridge Pref and Air Canada

0.07

Correlation Coefficient

Enbridge Pref  Air Canada

Significant diversification

The 3 months correlation between Enbridge and Air is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge Pref 13 and Air Canada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Canada 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 Air Canada. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Canada has no effect on the direction of Enbridge Pref i.e., Enbridge Pref and Air Canada go up and down completely randomly.

Pair Corralation between Enbridge Pref and Air Canada

Assuming the 90 days trading horizon Enbridge Pref 13 is expected to generate 0.26 times more return on investment than Air Canada. However, Enbridge Pref 13 is 3.8 times less risky than Air Canada. It trades about 0.26 of its potential returns per unit of risk. Air Canada is currently generating about 0.06 per unit of risk. If you would invest  1,773  in Enbridge Pref 13 on October 23, 2024 and sell it today you would earn a total of  201.00  from holding Enbridge Pref 13 or generate 11.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.08%
Values	Daily Returns

Enbridge Pref 13  vs.  Air Canada

Enbridge Pref 13

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge Pref 13 are ranked lower than 20 (%) 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.

Air Canada

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Air Canada are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Air Canada may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Enbridge Pref and Air Canada

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

The idea behind Enbridge Pref 13 and Air Canada 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.