Correlation Between Nasdaq and Enbridge Pref

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

By analyzing existing cross correlation between Nasdaq Inc and Enbridge Pref 1, you can compare the effects of market volatilities on Nasdaq 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 Nasdaq with a short position of Enbridge Pref. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and Enbridge Pref.

Diversification Opportunities for Nasdaq and Enbridge Pref

0.82

Correlation Coefficient

Nasdaq  Enbridge Pref

Very poor diversification

The 3 months correlation between Nasdaq and Enbridge is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Enbridge Pref 1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge Pref 1 and Nasdaq 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 Nasdaq Inc 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 1 has no effect on the direction of Nasdaq i.e., Nasdaq and Enbridge Pref go up and down completely randomly.

Pair Corralation between Nasdaq and Enbridge Pref

Given the investment horizon of 90 days Nasdaq Inc is expected to generate 3.13 times more return on investment than Enbridge Pref. However, Nasdaq is 3.13 times more volatile than Enbridge Pref 1. It trades about 0.12 of its potential returns per unit of risk. Enbridge Pref 1 is currently generating about 0.13 per unit of risk. If you would invest  7,279  in Nasdaq Inc on September 30, 2024 and sell it today you would earn a total of  563.00  from holding Nasdaq Inc or generate 7.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Nasdaq Inc  vs.  Enbridge Pref 1

Nasdaq Inc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Nasdaq may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Enbridge Pref 1

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge Pref 1 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Enbridge Pref is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nasdaq and Enbridge Pref

The main advantage of trading using opposite Nasdaq and Enbridge Pref positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq 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 Nasdaq Inc and Enbridge Pref 1 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.