Correlation Between ONEOK and Enbridge

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

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

Diversification Opportunities for ONEOK and Enbridge

0.95

Correlation Coefficient

ONEOK  Enbridge

Almost no diversification

The 3 months correlation between ONEOK and Enbridge is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding ONEOK Inc and Enbridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge and ONEOK 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 ONEOK Inc are associated (or correlated) with Enbridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enbridge has no effect on the direction of ONEOK i.e., ONEOK and Enbridge go up and down completely randomly.

Pair Corralation between ONEOK and Enbridge

Assuming the 90 days horizon ONEOK Inc is expected to under-perform the Enbridge. In addition to that, ONEOK is 1.45 times more volatile than Enbridge. It trades about -0.53 of its total potential returns per unit of risk. Enbridge is currently generating about -0.21 per unit of volatility. If you would invest  4,123  in Enbridge on September 22, 2024 and sell it today you would lose (176.00) from holding Enbridge or give up 4.27% of portfolio value over 90 days.

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

ONEOK Inc  vs.  Enbridge

ONEOK Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ONEOK Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, ONEOK reported solid returns over the last few months and may actually be approaching a breakup point.

Enbridge

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Enbridge may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ONEOK and Enbridge

The main advantage of trading using opposite ONEOK and Enbridge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ONEOK position performs unexpectedly, Enbridge 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 will offset losses from the drop in Enbridge's long position.

The idea behind ONEOK Inc and Enbridge 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.