Correlation Between Enbridge and Boralex

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

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

Diversification Opportunities for Enbridge and Boralex

-0.74

Correlation Coefficient

Enbridge  Boralex

Pay attention - limited upside

The 3 months correlation between Enbridge and Boralex is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge and Boralex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boralex and Enbridge 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 are associated (or correlated) with Boralex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boralex has no effect on the direction of Enbridge i.e., Enbridge and Boralex go up and down completely randomly.

Pair Corralation between Enbridge and Boralex

Assuming the 90 days trading horizon Enbridge is expected to under-perform the Boralex. But the stock apears to be less risky and, when comparing its historical volatility, Enbridge is 1.54 times less risky than Boralex. The stock trades about -0.08 of its potential returns per unit of risk. The Boralex is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest  2,439  in Boralex on December 4, 2024 and sell it today you would earn a total of  452.00  from holding Boralex or generate 18.53% return on investment over 90 days.

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

Enbridge  vs.  Boralex

Enbridge

Risk-Adjusted Performance

Insignificant

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

Boralex

Risk-Adjusted Performance

Very Weak

Over the last 90 days Boralex has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Boralex 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 and Boralex

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

The idea behind Enbridge and Boralex 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.