Correlation Between Enbridge Pref and InPlay Oil

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

By analyzing existing cross correlation between Enbridge Pref 3 and InPlay Oil Corp, you can compare the effects of market volatilities on Enbridge Pref and InPlay Oil 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 InPlay Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enbridge Pref and InPlay Oil.

Diversification Opportunities for Enbridge Pref and InPlay Oil

-0.51

Correlation Coefficient

Enbridge Pref  InPlay Oil

Excellent diversification

The 3 months correlation between Enbridge and InPlay is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge Pref 3 and InPlay Oil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InPlay Oil Corp 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 3 are associated (or correlated) with InPlay Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InPlay Oil Corp has no effect on the direction of Enbridge Pref i.e., Enbridge Pref and InPlay Oil go up and down completely randomly.

Pair Corralation between Enbridge Pref and InPlay Oil

Assuming the 90 days trading horizon Enbridge Pref is expected to generate 1.3 times less return on investment than InPlay Oil. But when comparing it to its historical volatility, Enbridge Pref 3 is 3.9 times less risky than InPlay Oil. It trades about 0.38 of its potential returns per unit of risk. InPlay Oil Corp is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  172.00  in InPlay Oil Corp on October 9, 2024 and sell it today you would earn a total of  9.00  from holding InPlay Oil Corp or generate 5.23% return on investment over 90 days.

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

Enbridge Pref 3  vs.  InPlay Oil Corp

Enbridge Pref 3

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge Pref 3 are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal fundamental drivers, Enbridge Pref may actually be approaching a critical reversion point that can send shares even higher in February 2025.

InPlay Oil Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days InPlay Oil Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Enbridge Pref and InPlay Oil

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

The idea behind Enbridge Pref 3 and InPlay Oil 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.