Correlation Between Eco Atlantic and Enbridge Pref

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

By analyzing existing cross correlation between Eco Atlantic Oil and Enbridge Pref 11, you can compare the effects of market volatilities on Eco Atlantic and Enbridge Pref 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 Eco Atlantic with a short position of Enbridge Pref. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eco Atlantic and Enbridge Pref.

Diversification Opportunities for Eco Atlantic and Enbridge Pref

0.47

Correlation Coefficient

Eco Atlantic  Enbridge Pref

Very weak diversification

The 3 months correlation between Eco and Enbridge is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Eco Atlantic Oil and Enbridge Pref 11 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge Pref 11 and Eco Atlantic 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 Eco Atlantic Oil are associated (or correlated) with Enbridge Pref. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enbridge Pref 11 has no effect on the direction of Eco Atlantic i.e., Eco Atlantic and Enbridge Pref go up and down completely randomly.

Pair Corralation between Eco Atlantic and Enbridge Pref

Assuming the 90 days horizon Eco Atlantic Oil is expected to under-perform the Enbridge Pref. In addition to that, Eco Atlantic is 7.42 times more volatile than Enbridge Pref 11. It trades about -0.16 of its total potential returns per unit of risk. Enbridge Pref 11 is currently generating about -0.09 per unit of volatility. If you would invest  1,980  in Enbridge Pref 11 on December 2, 2024 and sell it today you would lose (15.00) from holding Enbridge Pref 11 or give up 0.76% of portfolio value over 90 days.

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

Eco Atlantic Oil  vs.  Enbridge Pref 11

Eco Atlantic Oil

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Eco Atlantic Oil are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Eco Atlantic is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Enbridge Pref 11

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge Pref 11 are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Enbridge Pref is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Eco Atlantic and Enbridge Pref

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

The idea behind Eco Atlantic Oil and Enbridge Pref 11 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.