Correlation Between Enbridge and Finning International

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

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

Diversification Opportunities for Enbridge and Finning International

-0.86

Correlation Coefficient

Enbridge  Finning International

Pay attention - limited upside

The 3 months correlation between Enbridge and Finning is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge and Finning International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Finning International 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 Finning International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Finning International has no effect on the direction of Enbridge i.e., Enbridge and Finning International go up and down completely randomly.

Pair Corralation between Enbridge and Finning International

Assuming the 90 days trading horizon Enbridge is expected to generate 0.47 times more return on investment than Finning International. However, Enbridge is 2.13 times less risky than Finning International. It trades about 0.25 of its potential returns per unit of risk. Finning International is currently generating about -0.13 per unit of risk. If you would invest  5,466  in Enbridge on October 8, 2024 and sell it today you would earn a total of  695.00  from holding Enbridge or generate 12.71% return on investment over 90 days.

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

Enbridge  vs.  Finning International

Enbridge

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge are ranked lower than 20 (%) 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 February 2025.

Finning International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Finning International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Enbridge and Finning International

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

The idea behind Enbridge and Finning International 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.