Correlation Between Information Services and Enbridge Pref

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

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

Diversification Opportunities for Information Services and Enbridge Pref

-0.59

Correlation Coefficient

Information Services  Enbridge Pref

Excellent diversification

The 3 months correlation between Information and Enbridge is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Information Services 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 Information Services 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 Information Services 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 Information Services i.e., Information Services and Enbridge Pref go up and down completely randomly.

Pair Corralation between Information Services and Enbridge Pref

Assuming the 90 days trading horizon Information Services is expected to under-perform the Enbridge Pref. In addition to that, Information Services is 3.07 times more volatile than Enbridge Pref 5. It trades about -0.04 of its total potential returns per unit of risk. Enbridge Pref 5 is currently generating about 0.04 per unit of volatility. If you would invest  2,358  in Enbridge Pref 5 on December 27, 2024 and sell it today you would earn a total of  30.00  from holding Enbridge Pref 5 or generate 1.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	90.32%
Values	Daily Returns

Information Services  vs.  Enbridge Pref 5

Information Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Information Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Information Services 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

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge Pref 5 are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Enbridge Pref is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Information Services and Enbridge Pref

The main advantage of trading using opposite Information Services and Enbridge Pref positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Information Services 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 Information Services 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.