Correlation Between Enbridge and Enbridge Pref

Can any of the company-specific risk be diversified away by investing in both Enbridge 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 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 and Enbridge Pref 7, you can compare the effects of market volatilities on Enbridge 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 with a short position of Enbridge Pref. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enbridge and Enbridge Pref.

Diversification Opportunities for Enbridge and Enbridge Pref

-0.45

Correlation Coefficient

Enbridge  Enbridge Pref

Very good diversification

The 3 months correlation between Enbridge and Enbridge is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge and Enbridge Pref 7 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge Pref 7 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 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 7 has no effect on the direction of Enbridge i.e., Enbridge and Enbridge Pref go up and down completely randomly.

Pair Corralation between Enbridge and Enbridge Pref

Assuming the 90 days trading horizon Enbridge is expected to generate 1.32 times less return on investment than Enbridge Pref. In addition to that, Enbridge is 1.41 times more volatile than Enbridge Pref 7. It trades about 0.06 of its total potential returns per unit of risk. Enbridge Pref 7 is currently generating about 0.11 per unit of volatility. If you would invest  1,462  in Enbridge Pref 7 on September 28, 2024 and sell it today you would earn a total of  563.00  from holding Enbridge Pref 7 or generate 38.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Enbridge  vs.  Enbridge Pref 7

Enbridge

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental drivers, Enbridge may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Enbridge Pref 7

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enbridge Pref 7 has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with Enbridge and Enbridge Pref

The main advantage of trading using opposite Enbridge and Enbridge Pref positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enbridge 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 and Enbridge Pref 7 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.