Correlation Between Enbridge Srs and TC Energy

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

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

Diversification Opportunities for Enbridge Srs and TC Energy

0.23

Correlation Coefficient

Enbridge Srs  TC Energy

Modest diversification

The 3 months correlation between Enbridge and TRP-PB is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge Srs P and TC Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TC Energy Corp and Enbridge Srs 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 Srs P are associated (or correlated) with TC Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TC Energy Corp has no effect on the direction of Enbridge Srs i.e., Enbridge Srs and TC Energy go up and down completely randomly.

Pair Corralation between Enbridge Srs and TC Energy

Assuming the 90 days trading horizon Enbridge Srs P is expected to under-perform the TC Energy. But the preferred stock apears to be less risky and, when comparing its historical volatility, Enbridge Srs P is 1.84 times less risky than TC Energy. The preferred stock trades about -0.01 of its potential returns per unit of risk. The TC Energy Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,365  in TC Energy Corp on September 28, 2024 and sell it today you would earn a total of  60.00  from holding TC Energy Corp or generate 4.4% return on investment over 90 days.

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

Enbridge Srs P  vs.  TC Energy Corp

Enbridge Srs P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enbridge Srs P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Enbridge Srs is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

TC Energy Corp

Risk-Adjusted Performance

7 of 100

OK

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

Pair Trading with Enbridge Srs and TC Energy

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

The idea behind Enbridge Srs P and TC Energy Corp 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.