Correlation Between Everyday People and Enbridge Pref

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

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

Diversification Opportunities for Everyday People and Enbridge Pref

0.81

Correlation Coefficient

Everyday People  Enbridge Pref

Very poor diversification

The 3 months correlation between Everyday and Enbridge is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Everyday People Financial and Enbridge Pref L in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge Pref L and Everyday People 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 Everyday People Financial 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 L has no effect on the direction of Everyday People i.e., Everyday People and Enbridge Pref go up and down completely randomly.

Pair Corralation between Everyday People and Enbridge Pref

Assuming the 90 days horizon Everyday People Financial is expected to under-perform the Enbridge Pref. In addition to that, Everyday People is 10.85 times more volatile than Enbridge Pref L. It trades about -0.03 of its total potential returns per unit of risk. Enbridge Pref L is currently generating about 0.26 per unit of volatility. If you would invest  2,230  in Enbridge Pref L on December 4, 2024 and sell it today you would earn a total of  54.00  from holding Enbridge Pref L or generate 2.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

Everyday People Financial  vs.  Enbridge Pref L

Everyday People Financial

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Everyday People Financial are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Everyday People showed solid returns over the last few months and may actually be approaching a breakup point.

Enbridge Pref L

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge Pref L are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Enbridge Pref 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 Everyday People and Enbridge Pref

The main advantage of trading using opposite Everyday People and Enbridge Pref positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Everyday People 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 Everyday People Financial and Enbridge Pref L 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.