Correlation Between Pembina Pipeline and BII Railway

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Can any of the company-specific risk be diversified away by investing in both Pembina Pipeline and BII Railway 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 Pembina Pipeline and BII Railway into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pembina Pipeline Corp and BII Railway Transportation, you can compare the effects of market volatilities on Pembina Pipeline and BII Railway 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 Pembina Pipeline with a short position of BII Railway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pembina Pipeline and BII Railway.

Diversification Opportunities for Pembina Pipeline and BII Railway

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  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Pembina and BII is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Pembina Pipeline Corp and BII Railway Transportation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BII Railway Transpor and Pembina Pipeline 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 Pembina Pipeline Corp are associated (or correlated) with BII Railway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BII Railway Transpor has no effect on the direction of Pembina Pipeline i.e., Pembina Pipeline and BII Railway go up and down completely randomly.

Pair Corralation between Pembina Pipeline and BII Railway

Assuming the 90 days horizon Pembina Pipeline Corp is expected to under-perform the BII Railway. But the stock apears to be less risky and, when comparing its historical volatility, Pembina Pipeline Corp is 1.85 times less risky than BII Railway. The stock trades about -0.6 of its potential returns per unit of risk. The BII Railway Transportation is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  2.60  in BII Railway Transportation on September 27, 2024 and sell it today you would earn a total of  0.20  from holding BII Railway Transportation or generate 7.69% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Pembina Pipeline Corp  vs.  BII Railway Transportation

 Performance 
       Timeline  
Pembina Pipeline Corp 

Risk-Adjusted Performance

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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.
BII Railway Transpor 

Risk-Adjusted Performance

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Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in BII Railway Transportation are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, BII Railway may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pembina Pipeline and BII Railway Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Pembina Pipeline and BII Railway

The main advantage of trading using opposite Pembina Pipeline and BII Railway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pembina Pipeline position performs unexpectedly, BII Railway 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 BII Railway will offset losses from the drop in BII Railway's long position.
The idea behind Pembina Pipeline Corp and BII Railway Transportation 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.

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