Correlation Between GrafTech International and Pembina Pipeline

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

By analyzing existing cross correlation between GrafTech International and Pembina Pipeline Corp, you can compare the effects of market volatilities on GrafTech International 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 GrafTech International with a short position of Pembina Pipeline. Check out your portfolio center. Please also check ongoing floating volatility patterns of GrafTech International and Pembina Pipeline.

Diversification Opportunities for GrafTech International and Pembina Pipeline

0.32

Correlation Coefficient

GrafTech International  Pembina Pipeline

Weak diversification

The 3 months correlation between GrafTech and Pembina is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding GrafTech International 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 GrafTech International 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 GrafTech International 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 GrafTech International i.e., GrafTech International and Pembina Pipeline go up and down completely randomly.

Pair Corralation between GrafTech International and Pembina Pipeline

Assuming the 90 days horizon GrafTech International is expected to under-perform the Pembina Pipeline. In addition to that, GrafTech International is 3.19 times more volatile than Pembina Pipeline Corp. It trades about -0.19 of its total potential returns per unit of risk. Pembina Pipeline Corp is currently generating about -0.12 per unit of volatility. If you would invest  3,630  in Pembina Pipeline Corp on October 11, 2024 and sell it today you would lose (86.00) from holding Pembina Pipeline Corp or give up 2.37% of portfolio value over 90 days.

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

GrafTech International  vs.  Pembina Pipeline Corp

GrafTech International

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GrafTech International are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, GrafTech International reported solid returns over the last few months and may actually be approaching a breakup point.

Pembina Pipeline Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pembina Pipeline Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Pembina Pipeline is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with GrafTech International and Pembina Pipeline

The main advantage of trading using opposite GrafTech International and Pembina Pipeline positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GrafTech International 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 GrafTech International 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.