Correlation Between Enbridge Pref and Eco Atlantic

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

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

Diversification Opportunities for Enbridge Pref and Eco Atlantic

0.53

Correlation Coefficient

Enbridge Pref  Eco Atlantic

Very weak diversification

The 3 months correlation between Enbridge and Eco is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge Pref L and Eco Atlantic Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eco Atlantic Oil 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 L are associated (or correlated) with Eco Atlantic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eco Atlantic Oil has no effect on the direction of Enbridge Pref i.e., Enbridge Pref and Eco Atlantic go up and down completely randomly.

Pair Corralation between Enbridge Pref and Eco Atlantic

Assuming the 90 days trading horizon Enbridge Pref is expected to generate 5.25 times less return on investment than Eco Atlantic. But when comparing it to its historical volatility, Enbridge Pref L is 6.43 times less risky than Eco Atlantic. It trades about 0.1 of its potential returns per unit of risk. Eco Atlantic Oil is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  18.00  in Eco Atlantic Oil on October 21, 2024 and sell it today you would earn a total of  3.00  from holding Eco Atlantic Oil or generate 16.67% return on investment over 90 days.

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

Enbridge Pref L  vs.  Eco Atlantic Oil

Enbridge Pref L

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge Pref L are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Enbridge Pref is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Eco Atlantic Oil

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Eco Atlantic Oil are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Eco Atlantic showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enbridge Pref and Eco Atlantic

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

The idea behind Enbridge Pref L and Eco Atlantic Oil 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.