Correlation Between Enbridge and Premium Income

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

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

Diversification Opportunities for Enbridge and Premium Income

-0.41

Correlation Coefficient

Enbridge  Premium Income

Very good diversification

The 3 months correlation between Enbridge and Premium is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge and Premium Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premium Income 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 Premium Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premium Income has no effect on the direction of Enbridge i.e., Enbridge and Premium Income go up and down completely randomly.

Pair Corralation between Enbridge and Premium Income

Assuming the 90 days trading horizon Enbridge is expected to generate 0.71 times more return on investment than Premium Income. However, Enbridge is 1.41 times less risky than Premium Income. It trades about 0.28 of its potential returns per unit of risk. Premium Income is currently generating about -0.07 per unit of risk. If you would invest  5,618  in Enbridge on October 24, 2024 and sell it today you would earn a total of  883.00  from holding Enbridge or generate 15.72% 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.  Premium Income

Enbridge

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge are ranked lower than 22 (%) 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.

Premium Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Premium Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Premium Income is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Enbridge and Premium Income

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

The idea behind Enbridge and Premium Income 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.