Correlation Between Pembina Pipeline and AltaGas

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

Diversification Opportunities for Pembina Pipeline and AltaGas

0.2

Correlation Coefficient

Pembina Pipeline  AltaGas

Modest diversification

The 3 months correlation between Pembina and AltaGas is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Pembina Pipeline Corp and AltaGas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AltaGas 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 AltaGas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AltaGas has no effect on the direction of Pembina Pipeline i.e., Pembina Pipeline and AltaGas go up and down completely randomly.

Pair Corralation between Pembina Pipeline and AltaGas

Assuming the 90 days trading horizon Pembina Pipeline Corp is expected to under-perform the AltaGas. In addition to that, Pembina Pipeline is 1.22 times more volatile than AltaGas. It trades about -0.11 of its total potential returns per unit of risk. AltaGas is currently generating about 0.19 per unit of volatility. If you would invest  3,318  in AltaGas on September 5, 2024 and sell it today you would earn a total of  143.00  from holding AltaGas or generate 4.31% 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.  AltaGas

Pembina Pipeline Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pembina Pipeline Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, Pembina Pipeline is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

AltaGas

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AltaGas are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, AltaGas is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Pembina Pipeline and AltaGas

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

The idea behind Pembina Pipeline Corp and AltaGas 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.