Correlation Between Enbridge Pref and Diversified Royalty

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

Diversification Opportunities for Enbridge Pref and Diversified Royalty

-0.73

Correlation Coefficient

Enbridge Pref  Diversified Royalty

Pay attention - limited upside

The 3 months correlation between Enbridge and Diversified is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge Pref 15 and Diversified Royalty Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diversified Royalty 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 15 are associated (or correlated) with Diversified Royalty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diversified Royalty Corp has no effect on the direction of Enbridge Pref i.e., Enbridge Pref and Diversified Royalty go up and down completely randomly.

Pair Corralation between Enbridge Pref and Diversified Royalty

Assuming the 90 days trading horizon Enbridge Pref 15 is expected to generate 0.78 times more return on investment than Diversified Royalty. However, Enbridge Pref 15 is 1.28 times less risky than Diversified Royalty. It trades about 0.28 of its potential returns per unit of risk. Diversified Royalty Corp is currently generating about -0.08 per unit of risk. If you would invest  1,767  in Enbridge Pref 15 on October 22, 2024 and sell it today you would earn a total of  194.00  from holding Enbridge Pref 15 or generate 10.98% return on investment over 90 days.

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

Enbridge Pref 15  vs.  Diversified Royalty Corp

Enbridge Pref 15

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge Pref 15 are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Enbridge Pref may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Diversified Royalty Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Diversified Royalty Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Diversified Royalty is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Enbridge Pref and Diversified Royalty

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

The idea behind Enbridge Pref 15 and Diversified Royalty 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.