Correlation Between Enbridge H and Enbridge F

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

By analyzing existing cross correlation between Enbridge H Cum and Enbridge F Cum, you can compare the effects of market volatilities on Enbridge H and Enbridge F 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 H with a short position of Enbridge F. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enbridge H and Enbridge F.

Diversification Opportunities for Enbridge H and Enbridge F

0.83

Correlation Coefficient

Enbridge H  Enbridge F

Very poor diversification

The 3 months correlation between Enbridge and Enbridge is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge H Cum and Enbridge F Cum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge F Cum and Enbridge H 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 H Cum are associated (or correlated) with Enbridge F. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enbridge F Cum has no effect on the direction of Enbridge H i.e., Enbridge H and Enbridge F go up and down completely randomly.

Pair Corralation between Enbridge H and Enbridge F

Assuming the 90 days trading horizon Enbridge H is expected to generate 1.07 times less return on investment than Enbridge F. In addition to that, Enbridge H is 1.1 times more volatile than Enbridge F Cum. It trades about 0.1 of its total potential returns per unit of risk. Enbridge F Cum is currently generating about 0.12 per unit of volatility. If you would invest  1,882  in Enbridge F Cum on December 26, 2024 and sell it today you would earn a total of  64.00  from holding Enbridge F Cum or generate 3.4% return on investment over 90 days.

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

Enbridge H Cum  vs.  Enbridge F Cum

Enbridge H Cum

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge H Cum are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Enbridge H is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Enbridge F Cum

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge F Cum are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Enbridge F is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Enbridge H and Enbridge F

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

The idea behind Enbridge H Cum and Enbridge F Cum 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.