Correlation Between Pembina Pipeline and Bip Investment

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

Diversification Opportunities for Pembina Pipeline and Bip Investment

-0.87

Correlation Coefficient

Pembina Pipeline  Bip Investment

Pay attention - limited upside

The 3 months correlation between Pembina and Bip is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Pembina Pipeline Corp and Bip Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bip Investment Corp 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 Bip Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bip Investment Corp has no effect on the direction of Pembina Pipeline i.e., Pembina Pipeline and Bip Investment go up and down completely randomly.

Pair Corralation between Pembina Pipeline and Bip Investment

Assuming the 90 days trading horizon Pembina Pipeline Corp is expected to under-perform the Bip Investment. But the preferred stock apears to be less risky and, when comparing its historical volatility, Pembina Pipeline Corp is 1.4 times less risky than Bip Investment. The preferred stock trades about -0.08 of its potential returns per unit of risk. The Bip Investment Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,600  in Bip Investment Corp on September 4, 2024 and sell it today you would earn a total of  60.00  from holding Bip Investment Corp or generate 2.31% return on investment over 90 days.

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

Pembina Pipeline Corp  vs.  Bip Investment Corp

Pembina Pipeline Corp

Risk-Adjusted Performance

0 of 100

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 somewhat strong essential indicators, Pembina Pipeline is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Bip Investment Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bip Investment Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward-looking signals, Bip Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Pembina Pipeline and Bip Investment

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

The idea behind Pembina Pipeline Corp and Bip Investment 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.