Correlation Between Pembina Pipeline and LTC Properties

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

Diversification Opportunities for Pembina Pipeline and LTC Properties

0.57

Correlation Coefficient

Pembina Pipeline  LTC Properties

Very weak diversification

The 3 months correlation between Pembina and LTC is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Pembina Pipeline Corp and LTC Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LTC Properties 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 LTC Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LTC Properties has no effect on the direction of Pembina Pipeline i.e., Pembina Pipeline and LTC Properties go up and down completely randomly.

Pair Corralation between Pembina Pipeline and LTC Properties

Considering the 90-day investment horizon Pembina Pipeline Corp is expected to generate 1.19 times more return on investment than LTC Properties. However, Pembina Pipeline is 1.19 times more volatile than LTC Properties. It trades about 0.13 of its potential returns per unit of risk. LTC Properties is currently generating about 0.05 per unit of risk. If you would invest  3,611  in Pembina Pipeline Corp on December 27, 2024 and sell it today you would earn a total of  398.00  from holding Pembina Pipeline Corp or generate 11.02% return on investment over 90 days.

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

Pembina Pipeline Corp  vs.  LTC Properties

Pembina Pipeline Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pembina Pipeline Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental drivers, Pembina Pipeline may actually be approaching a critical reversion point that can send shares even higher in April 2025.

LTC Properties

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in LTC Properties are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, LTC Properties is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Pembina Pipeline and LTC Properties

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

The idea behind Pembina Pipeline Corp and LTC Properties 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.