Correlation Between Premium Income and Pembina Pipeline

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

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

Diversification Opportunities for Premium Income and Pembina Pipeline

0.6

Correlation Coefficient

Premium Income  Pembina Pipeline

Poor diversification

The 3 months correlation between Premium and Pembina is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Premium Income and Pembina Pipeline Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pembina Pipeline Corp and Premium Income 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 Premium Income are associated (or correlated) with Pembina Pipeline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pembina Pipeline Corp has no effect on the direction of Premium Income i.e., Premium Income and Pembina Pipeline go up and down completely randomly.

Pair Corralation between Premium Income and Pembina Pipeline

Assuming the 90 days trading horizon Premium Income is expected to under-perform the Pembina Pipeline. In addition to that, Premium Income is 1.06 times more volatile than Pembina Pipeline Corp. It trades about -0.17 of its total potential returns per unit of risk. Pembina Pipeline Corp is currently generating about -0.15 per unit of volatility. If you would invest  5,669  in Pembina Pipeline Corp on November 29, 2024 and sell it today you would lose (476.00) from holding Pembina Pipeline Corp or give up 8.4% of portfolio value over 90 days.

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

Premium Income  vs.  Pembina Pipeline Corp

Premium Income

Risk-Adjusted Performance

Very Weak

Over the last 90 days Premium Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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. In spite of latest unfluctuating performance, the Stock's essential indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Premium Income and Pembina Pipeline

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

The idea behind Premium Income and Pembina Pipeline Corp 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.