Correlation Between Pembina Pipeline and Bombardier

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

Diversification Opportunities for Pembina Pipeline and Bombardier

-0.21

Correlation Coefficient

Pembina Pipeline  Bombardier

Very good diversification

The 3 months correlation between Pembina and Bombardier is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Pembina Pipeline Corp and Bombardier in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bombardier 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 Bombardier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bombardier has no effect on the direction of Pembina Pipeline i.e., Pembina Pipeline and Bombardier go up and down completely randomly.

Pair Corralation between Pembina Pipeline and Bombardier

Assuming the 90 days trading horizon Pembina Pipeline is expected to generate 1.55 times less return on investment than Bombardier. But when comparing it to its historical volatility, Pembina Pipeline Corp is 3.53 times less risky than Bombardier. It trades about 0.09 of its potential returns per unit of risk. Bombardier is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  5,987  in Bombardier on December 6, 2024 and sell it today you would earn a total of  2,702  from holding Bombardier or generate 45.13% return on investment over 90 days.

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

Pembina Pipeline Corp  vs.  Bombardier

Pembina Pipeline Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pembina Pipeline Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, Pembina Pipeline is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Bombardier

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bombardier has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Pembina Pipeline and Bombardier

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

The idea behind Pembina Pipeline Corp and Bombardier 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.