Correlation Between Premier African and Enbridge

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

By analyzing existing cross correlation between Premier African Minerals and Enbridge, you can compare the effects of market volatilities on Premier African and Enbridge 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 Premier African with a short position of Enbridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Premier African and Enbridge.

Diversification Opportunities for Premier African and Enbridge

0.3

Correlation Coefficient

Premier African  Enbridge

Weak diversification

The 3 months correlation between Premier and Enbridge is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Premier African Minerals and Enbridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge and Premier African 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 Premier African Minerals are associated (or correlated) with Enbridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enbridge has no effect on the direction of Premier African i.e., Premier African and Enbridge go up and down completely randomly.

Pair Corralation between Premier African and Enbridge

Assuming the 90 days trading horizon Premier African Minerals is expected to under-perform the Enbridge. In addition to that, Premier African is 5.1 times more volatile than Enbridge. It trades about -0.27 of its total potential returns per unit of risk. Enbridge is currently generating about 0.66 per unit of volatility. If you would invest  5,914  in Enbridge on October 17, 2024 and sell it today you would earn a total of  481.00  from holding Enbridge or generate 8.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	65.0%
Values	Daily Returns

Premier African Minerals  vs.  Enbridge

Premier African Minerals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Premier African Minerals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Premier African is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Enbridge

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Enbridge unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Premier African and Enbridge

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

The idea behind Premier African Minerals and Enbridge 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 Stocks Directory module to find actively traded stocks across global markets.