Correlation Between Enbridge Pref and Enbridge Pref

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

By analyzing existing cross correlation between Enbridge Pref 1 and Enbridge Pref 5, you can compare the effects of market volatilities on Enbridge Pref and Enbridge Pref 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 Enbridge Pref. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enbridge Pref and Enbridge Pref.

Diversification Opportunities for Enbridge Pref and Enbridge Pref

0.9

Correlation Coefficient

Enbridge Pref  Enbridge Pref

Almost no diversification

The 3 months correlation between Enbridge and Enbridge is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge Pref 1 and Enbridge Pref 5 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge Pref 5 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 1 are associated (or correlated) with Enbridge Pref. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enbridge Pref 5 has no effect on the direction of Enbridge Pref i.e., Enbridge Pref and Enbridge Pref go up and down completely randomly.

Pair Corralation between Enbridge Pref and Enbridge Pref

Assuming the 90 days trading horizon Enbridge Pref is expected to generate 1.25 times less return on investment than Enbridge Pref. But when comparing it to its historical volatility, Enbridge Pref 1 is 1.08 times less risky than Enbridge Pref. It trades about 0.1 of its potential returns per unit of risk. Enbridge Pref 5 is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,802  in Enbridge Pref 5 on September 30, 2024 and sell it today you would earn a total of  597.00  from holding Enbridge Pref 5 or generate 33.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.11%
Values	Daily Returns

Enbridge Pref 1  vs.  Enbridge Pref 5

Enbridge Pref 1

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge Pref 1 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Enbridge Pref is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Enbridge Pref 5

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge Pref 5 are ranked lower than 9 (%) 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.

Pair Trading with Enbridge Pref and Enbridge Pref

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

The idea behind Enbridge Pref 1 and Enbridge Pref 5 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.