Correlation Between Pembina Pipeline and Enbridge

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

Diversification Opportunities for Pembina Pipeline and Enbridge

0.08

Correlation Coefficient

Pembina Pipeline  Enbridge

Significant diversification

The 3 months correlation between Pembina and Enbridge is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Pembina Pipeline Corp and Enbridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge 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 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 Pembina Pipeline i.e., Pembina Pipeline and Enbridge go up and down completely randomly.

Pair Corralation between Pembina Pipeline and Enbridge

Assuming the 90 days horizon Pembina Pipeline Corp is expected to generate 0.98 times more return on investment than Enbridge. However, Pembina Pipeline Corp is 1.02 times less risky than Enbridge. It trades about 0.06 of its potential returns per unit of risk. Enbridge is currently generating about 0.05 per unit of risk. If you would invest  2,498  in Pembina Pipeline Corp on December 11, 2024 and sell it today you would earn a total of  974.00  from holding Pembina Pipeline Corp or generate 38.99% return on investment over 90 days.

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

Pembina Pipeline Corp  vs.  Enbridge

Pembina Pipeline Corp

Risk-Adjusted Performance

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 newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Enbridge

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Pembina Pipeline and Enbridge

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

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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.