Correlation Between Enbridge Pref and CVW CleanTech

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

By analyzing existing cross correlation between Enbridge Pref 15 and CVW CleanTech, you can compare the effects of market volatilities on Enbridge Pref and CVW CleanTech 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 CVW CleanTech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enbridge Pref and CVW CleanTech.

Diversification Opportunities for Enbridge Pref and CVW CleanTech

0.38

Correlation Coefficient

Enbridge Pref  CVW CleanTech

Weak diversification

The 3 months correlation between Enbridge and CVW is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge Pref 15 and CVW CleanTech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVW CleanTech 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 15 are associated (or correlated) with CVW CleanTech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVW CleanTech has no effect on the direction of Enbridge Pref i.e., Enbridge Pref and CVW CleanTech go up and down completely randomly.

Pair Corralation between Enbridge Pref and CVW CleanTech

Assuming the 90 days trading horizon Enbridge Pref 15 is expected to generate 0.23 times more return on investment than CVW CleanTech. However, Enbridge Pref 15 is 4.28 times less risky than CVW CleanTech. It trades about 0.32 of its potential returns per unit of risk. CVW CleanTech is currently generating about -0.03 per unit of risk. If you would invest  1,841  in Enbridge Pref 15 on October 10, 2024 and sell it today you would earn a total of  94.00  from holding Enbridge Pref 15 or generate 5.11% return on investment over 90 days.

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

Enbridge Pref 15  vs.  CVW CleanTech

Enbridge Pref 15

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge Pref 15 are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Enbridge Pref may actually be approaching a critical reversion point that can send shares even higher in February 2025.

CVW CleanTech

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CVW CleanTech are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, CVW CleanTech may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Enbridge Pref and CVW CleanTech

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

The idea behind Enbridge Pref 15 and CVW CleanTech 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.