Correlation Between Transport International and Pembina Pipeline

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

Diversification Opportunities for Transport International and Pembina Pipeline

0.27

Correlation Coefficient

Transport International  Pembina Pipeline

Modest diversification

The 3 months correlation between Transport and Pembina is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Transport International Holdin 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 Transport 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 Transport International Holdings 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 Transport International i.e., Transport International and Pembina Pipeline go up and down completely randomly.

Pair Corralation between Transport International and Pembina Pipeline

Assuming the 90 days horizon Transport International Holdings is expected to generate 1.41 times more return on investment than Pembina Pipeline. However, Transport International is 1.41 times more volatile than Pembina Pipeline Corp. It trades about -0.08 of its potential returns per unit of risk. Pembina Pipeline Corp is currently generating about -0.6 per unit of risk. If you would invest  96.00  in Transport International Holdings on September 27, 2024 and sell it today you would lose (2.00) from holding Transport International Holdings or give up 2.08% of portfolio value over 90 days.

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

Transport International Holdin  vs.  Pembina Pipeline Corp

Transport International

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 Transport International and Pembina Pipeline

The main advantage of trading using opposite Transport International and Pembina Pipeline positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transport 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 Transport International Holdings 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.

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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 Commodity Directory module to find actively traded commodities issued by global exchanges.