Correlation Between Energy Transfer and Enbridge

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

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

Diversification Opportunities for Energy Transfer and Enbridge

0.45

Correlation Coefficient

Energy Transfer  Enbridge

Very weak diversification

The 3 months correlation between Energy and Enbridge is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Energy Transfer LP and Enbridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge and Energy Transfer 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 Energy Transfer LP are associated (or correlated) with Enbridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enbridge has no effect on the direction of Energy Transfer i.e., Energy Transfer and Enbridge go up and down completely randomly.

Pair Corralation between Energy Transfer and Enbridge

Allowing for the 90-day total investment horizon Energy Transfer LP is expected to under-perform the Enbridge. In addition to that, Energy Transfer is 1.47 times more volatile than Enbridge. It trades about -0.02 of its total potential returns per unit of risk. Enbridge is currently generating about 0.1 per unit of volatility. If you would invest  4,150  in Enbridge on December 28, 2024 and sell it today you would earn a total of  296.00  from holding Enbridge or generate 7.13% return on investment over 90 days.

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

Energy Transfer LP  vs.  Enbridge

Energy Transfer LP

Risk-Adjusted Performance

Very Weak

Over the last 90 days Energy Transfer LP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Energy Transfer is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Enbridge

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Enbridge may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Energy Transfer and Enbridge

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

The idea behind Energy Transfer LP and Enbridge 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.

Check out your portfolio center.

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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.