Correlation Between Enbridge and FuelPositive Corp

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

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

Diversification Opportunities for Enbridge and FuelPositive Corp

-0.46

Correlation Coefficient

Enbridge  FuelPositive Corp

Very good diversification

The 3 months correlation between Enbridge and FuelPositive is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge and FuelPositive Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FuelPositive Corp 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 FuelPositive Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FuelPositive Corp has no effect on the direction of Enbridge i.e., Enbridge and FuelPositive Corp go up and down completely randomly.

Pair Corralation between Enbridge and FuelPositive Corp

Assuming the 90 days trading horizon Enbridge is expected to generate 1.87 times less return on investment than FuelPositive Corp. But when comparing it to its historical volatility, Enbridge is 10.96 times less risky than FuelPositive Corp. It trades about 0.27 of its potential returns per unit of risk. FuelPositive Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3.50  in FuelPositive Corp on October 25, 2024 and sell it today you would earn a total of  0.00  from holding FuelPositive Corp or generate 0.0% return on investment over 90 days.

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

Enbridge  vs.  FuelPositive Corp

Enbridge

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental drivers, Enbridge displayed solid returns over the last few months and may actually be approaching a breakup point.

FuelPositive Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in FuelPositive Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical indicators, FuelPositive Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enbridge and FuelPositive Corp

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

The idea behind Enbridge and FuelPositive 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.