Correlation Between Enbridge and Tidewater Midstream

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

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

Diversification Opportunities for Enbridge and Tidewater Midstream

-0.87

Correlation Coefficient

Enbridge  Tidewater Midstream

Pay attention - limited upside

The 3 months correlation between Enbridge and Tidewater is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge and Tidewater Midstream and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tidewater Midstream and 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 Tidewater Midstream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tidewater Midstream and has no effect on the direction of Enbridge i.e., Enbridge and Tidewater Midstream go up and down completely randomly.

Pair Corralation between Enbridge and Tidewater Midstream

Assuming the 90 days trading horizon Enbridge is expected to generate 2.38 times less return on investment than Tidewater Midstream. But when comparing it to its historical volatility, Enbridge is 7.71 times less risky than Tidewater Midstream. It trades about 0.28 of its potential returns per unit of risk. Tidewater Midstream and is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  14.00  in Tidewater Midstream and on October 10, 2024 and sell it today you would earn a total of  1.00  from holding Tidewater Midstream and or generate 7.14% return on investment over 90 days.

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

Enbridge  vs.  Tidewater Midstream and

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 displayed solid returns over the last few months and may actually be approaching a breakup point.

Tidewater Midstream and

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tidewater Midstream and 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 primary 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 Tidewater Midstream

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

The idea behind Enbridge and Tidewater Midstream and 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.