Correlation Between European Residential and Enbridge Pref

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

By analyzing existing cross correlation between European Residential Real and Enbridge Pref 15, you can compare the effects of market volatilities on European Residential 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 European Residential with a short position of Enbridge Pref. Check out your portfolio center. Please also check ongoing floating volatility patterns of European Residential and Enbridge Pref.

Diversification Opportunities for European Residential and Enbridge Pref

0.63

Correlation Coefficient

European Residential  Enbridge Pref

Poor diversification

The 3 months correlation between European and Enbridge is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding European Residential Real and Enbridge Pref 15 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge Pref 15 and European Residential 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 European Residential Real 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 15 has no effect on the direction of European Residential i.e., European Residential and Enbridge Pref go up and down completely randomly.

Pair Corralation between European Residential and Enbridge Pref

Assuming the 90 days trading horizon European Residential is expected to generate 1.57 times less return on investment than Enbridge Pref. In addition to that, European Residential is 3.32 times more volatile than Enbridge Pref 15. It trades about 0.07 of its total potential returns per unit of risk. Enbridge Pref 15 is currently generating about 0.37 per unit of volatility. If you would invest  1,806  in Enbridge Pref 15 on September 23, 2024 and sell it today you would earn a total of  89.00  from holding Enbridge Pref 15 or generate 4.93% return on investment over 90 days.

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

European Residential Real  vs.  Enbridge Pref 15

European Residential Real

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in European Residential Real are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, European Residential sustained solid returns over the last few months and may actually be approaching a breakup point.

Enbridge Pref 15

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge Pref 15 are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Enbridge Pref is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with European Residential and Enbridge Pref

The main advantage of trading using opposite European Residential and Enbridge Pref positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if European Residential 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 European Residential Real and Enbridge Pref 15 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.