Correlation Between Enbridge Pref and Avanti Energy

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

By analyzing existing cross correlation between Enbridge Pref 5 and Avanti Energy, you can compare the effects of market volatilities on Enbridge Pref and Avanti Energy 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 Avanti Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enbridge Pref and Avanti Energy.

Diversification Opportunities for Enbridge Pref and Avanti Energy

-0.46

Correlation Coefficient

Enbridge Pref  Avanti Energy

Very good diversification

The 3 months correlation between Enbridge and Avanti is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge Pref 5 and Avanti Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avanti Energy 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 5 are associated (or correlated) with Avanti Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avanti Energy has no effect on the direction of Enbridge Pref i.e., Enbridge Pref and Avanti Energy go up and down completely randomly.

Pair Corralation between Enbridge Pref and Avanti Energy

Assuming the 90 days trading horizon Enbridge Pref 5 is expected to generate 0.08 times more return on investment than Avanti Energy. However, Enbridge Pref 5 is 12.29 times less risky than Avanti Energy. It trades about 0.14 of its potential returns per unit of risk. Avanti Energy is currently generating about -0.06 per unit of risk. If you would invest  2,053  in Enbridge Pref 5 on October 25, 2024 and sell it today you would earn a total of  359.00  from holding Enbridge Pref 5 or generate 17.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.07%
Values	Daily Returns

Enbridge Pref 5  vs.  Avanti Energy

Enbridge Pref 5

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge Pref 5 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Enbridge Pref is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Avanti Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avanti Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Enbridge Pref and Avanti Energy

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

The idea behind Enbridge Pref 5 and Avanti Energy 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.