Correlation Between Energy Transfer and Pembina Pipeline

Can any of the company-specific risk be diversified away by investing in both Energy Transfer and Pembina Pipeline 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 Pembina Pipeline 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 Pembina Pipeline Corp, you can compare the effects of market volatilities on Energy Transfer and Pembina Pipeline 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 Pembina Pipeline. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Transfer and Pembina Pipeline.

Diversification Opportunities for Energy Transfer and Pembina Pipeline

0.3

Correlation Coefficient

Energy Transfer  Pembina Pipeline

Weak diversification

The 3 months correlation between Energy and Pembina is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Energy Transfer LP and Pembina Pipeline Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pembina Pipeline Corp 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 Pembina Pipeline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pembina Pipeline Corp has no effect on the direction of Energy Transfer i.e., Energy Transfer and Pembina Pipeline go up and down completely randomly.

Pair Corralation between Energy Transfer and Pembina Pipeline

Allowing for the 90-day total investment horizon Energy Transfer LP is expected to generate 0.91 times more return on investment than Pembina Pipeline. However, Energy Transfer LP is 1.1 times less risky than Pembina Pipeline. It trades about 0.69 of its potential returns per unit of risk. Pembina Pipeline Corp is currently generating about -0.05 per unit of risk. If you would invest  1,616  in Energy Transfer LP on August 31, 2024 and sell it today you would earn a total of  326.00  from holding Energy Transfer LP or generate 20.17% return on investment over 90 days.

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

Energy Transfer LP  vs.  Pembina Pipeline Corp

Energy Transfer LP

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Transfer LP are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Energy Transfer unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pembina Pipeline Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pembina Pipeline Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Pembina Pipeline is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Energy Transfer and Pembina Pipeline

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

The idea behind Energy Transfer LP and Pembina Pipeline Corp 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.