Correlation Between Enbridge Pref and Algonquin Power

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

Diversification Opportunities for Enbridge Pref and Algonquin Power

0.54
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Enbridge and Algonquin is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge Pref 13 and Algonquin Power Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Algonquin Power Utilities 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 Algonquin Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Algonquin Power Utilities has no effect on the direction of Enbridge Pref i.e., Enbridge Pref and Algonquin Power go up and down completely randomly.

Pair Corralation between Enbridge Pref and Algonquin Power

Assuming the 90 days trading horizon Enbridge Pref 13 is expected to generate 1.07 times more return on investment than Algonquin Power. However, Enbridge Pref is 1.07 times more volatile than Algonquin Power Utilities. It trades about 0.15 of its potential returns per unit of risk. Algonquin Power Utilities is currently generating about 0.08 per unit of risk. If you would invest  1,795  in Enbridge Pref 13 on September 22, 2024 and sell it today you would earn a total of  124.00  from holding Enbridge Pref 13 or generate 6.91% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy96.88%
ValuesDaily Returns

Enbridge Pref 13  vs.  Algonquin Power Utilities

 Performance 
       Timeline  
Enbridge Pref 13 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
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.
Algonquin Power Utilities 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Algonquin Power Utilities are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Algonquin Power is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Enbridge Pref and Algonquin Power Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Enbridge Pref and Algonquin Power

The main advantage of trading using opposite Enbridge Pref and Algonquin Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enbridge Pref position performs unexpectedly, Algonquin Power 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 Algonquin Power will offset losses from the drop in Algonquin Power's long position.
The idea behind Enbridge Pref 13 and Algonquin Power Utilities 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.

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