Correlation Between Pembina Pipeline and Energy Transfer

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

Diversification Opportunities for Pembina Pipeline and Energy Transfer

0.25

Correlation Coefficient

Pembina Pipeline  Energy Transfer

Modest diversification

The 3 months correlation between Pembina and Energy is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Pembina Pipeline Corp and Energy Transfer LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Transfer LP 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 Energy Transfer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Transfer LP has no effect on the direction of Pembina Pipeline i.e., Pembina Pipeline and Energy Transfer go up and down completely randomly.

Pair Corralation between Pembina Pipeline and Energy Transfer

Considering the 90-day investment horizon Pembina Pipeline is expected to generate 1.74 times less return on investment than Energy Transfer. But when comparing it to its historical volatility, Pembina Pipeline Corp is 1.17 times less risky than Energy Transfer. It trades about 0.13 of its potential returns per unit of risk. Energy Transfer LP is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  1,230  in Energy Transfer LP on September 2, 2024 and sell it today you would earn a total of  756.00  from holding Energy Transfer LP or generate 61.46% return on investment over 90 days.

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

Pembina Pipeline Corp  vs.  Energy Transfer LP

Pembina Pipeline Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pembina Pipeline Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Pembina Pipeline is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Energy Transfer LP

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Transfer LP are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Energy Transfer unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pembina Pipeline and Energy Transfer

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

The idea behind Pembina Pipeline Corp and Energy Transfer LP 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.