Correlation Between Enbridge H and Vermilion Energy

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

Diversification Opportunities for Enbridge H and Vermilion Energy

-0.37

Correlation Coefficient

Enbridge H  Vermilion Energy

Very good diversification

The 3 months correlation between Enbridge and Vermilion is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge H Cum and Vermilion Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vermilion Energy 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 Vermilion Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vermilion Energy has no effect on the direction of Enbridge H i.e., Enbridge H and Vermilion Energy go up and down completely randomly.

Pair Corralation between Enbridge H and Vermilion Energy

Assuming the 90 days trading horizon Enbridge H Cum is expected to generate 0.26 times more return on investment than Vermilion Energy. However, Enbridge H Cum is 3.81 times less risky than Vermilion Energy. It trades about 0.18 of its potential returns per unit of risk. Vermilion Energy is currently generating about -0.06 per unit of risk. If you would invest  1,799  in Enbridge H Cum on September 23, 2024 and sell it today you would earn a total of  233.00  from holding Enbridge H Cum or generate 12.95% return on investment over 90 days.

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

Enbridge H Cum  vs.  Vermilion Energy

Enbridge H Cum

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge H Cum are ranked lower than 5 (%) 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 latest stock price disturbance, may contribute to short-term losses for the investors.

Vermilion Energy

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Enbridge H and Vermilion Energy

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

The idea behind Enbridge H Cum and Vermilion 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.