Correlation Between Freehold Royalties and Enbridge Pref

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

By analyzing existing cross correlation between Freehold Royalties and Enbridge Pref 5, you can compare the effects of market volatilities on Freehold Royalties 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 Freehold Royalties with a short position of Enbridge Pref. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freehold Royalties and Enbridge Pref.

Diversification Opportunities for Freehold Royalties and Enbridge Pref

0.46

Correlation Coefficient

Freehold Royalties  Enbridge Pref

Very weak diversification

The 3 months correlation between Freehold and Enbridge is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Freehold Royalties and Enbridge Pref 5 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge Pref 5 and Freehold Royalties 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 Freehold Royalties 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 5 has no effect on the direction of Freehold Royalties i.e., Freehold Royalties and Enbridge Pref go up and down completely randomly.

Pair Corralation between Freehold Royalties and Enbridge Pref

Assuming the 90 days trading horizon Freehold Royalties is expected to generate 12.75 times less return on investment than Enbridge Pref. But when comparing it to its historical volatility, Freehold Royalties is 1.5 times less risky than Enbridge Pref. It trades about 0.01 of its potential returns per unit of risk. Enbridge Pref 5 is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,641  in Enbridge Pref 5 on September 12, 2024 and sell it today you would earn a total of  750.00  from holding Enbridge Pref 5 or generate 45.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.79%
Values	Daily Returns

Freehold Royalties  vs.  Enbridge Pref 5

Freehold Royalties

Risk-Adjusted Performance

1 of 100

Weak

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

Enbridge Pref 5

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge Pref 5 are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Enbridge Pref may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Freehold Royalties and Enbridge Pref

The main advantage of trading using opposite Freehold Royalties and Enbridge Pref positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freehold Royalties 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 Freehold Royalties and Enbridge Pref 5 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.