Correlation Between Enbridge Pref and Canacol Energy

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

Diversification Opportunities for Enbridge Pref and Canacol Energy

0.4

Correlation Coefficient

Enbridge Pref  Canacol Energy

Very weak diversification

The 3 months correlation between Enbridge and Canacol is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge Pref 5 and Canacol Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canacol 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 Canacol Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canacol Energy has no effect on the direction of Enbridge Pref i.e., Enbridge Pref and Canacol Energy go up and down completely randomly.

Pair Corralation between Enbridge Pref and Canacol Energy

Assuming the 90 days trading horizon Enbridge Pref 5 is expected to generate 0.7 times more return on investment than Canacol Energy. However, Enbridge Pref 5 is 1.43 times less risky than Canacol Energy. It trades about 0.05 of its potential returns per unit of risk. Canacol Energy is currently generating about -0.05 per unit of risk. If you would invest  1,662  in Enbridge Pref 5 on September 24, 2024 and sell it today you would earn a total of  733.00  from holding Enbridge Pref 5 or generate 44.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.59%
Values	Daily Returns

Enbridge Pref 5  vs.  Canacol Energy

Enbridge Pref 5

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge Pref 5 are ranked lower than 10 (%) 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.

Canacol Energy

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Canacol Energy are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal technical and fundamental indicators, Canacol Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Enbridge Pref and Canacol Energy

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

The idea behind Enbridge Pref 5 and Canacol 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.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.