Correlation Between Enbridge and Senvest Capital

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

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

Diversification Opportunities for Enbridge and Senvest Capital

0.67

Correlation Coefficient

Enbridge  Senvest Capital

Poor diversification

The 3 months correlation between Enbridge and Senvest is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge and Senvest Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Senvest Capital 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 Senvest Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Senvest Capital has no effect on the direction of Enbridge i.e., Enbridge and Senvest Capital go up and down completely randomly.

Pair Corralation between Enbridge and Senvest Capital

Assuming the 90 days trading horizon Enbridge is expected to generate 0.54 times more return on investment than Senvest Capital. However, Enbridge is 1.85 times less risky than Senvest Capital. It trades about 0.17 of its potential returns per unit of risk. Senvest Capital is currently generating about 0.08 per unit of risk. If you would invest  4,610  in Enbridge on October 9, 2024 and sell it today you would earn a total of  1,660  from holding Enbridge or generate 36.01% return on investment over 90 days.

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

Enbridge  vs.  Senvest Capital

Enbridge

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge are ranked lower than 18 (%) 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.

Senvest Capital

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Senvest Capital are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Senvest Capital displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enbridge and Senvest Capital

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

The idea behind Enbridge and Senvest Capital 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.