Correlation Between Rocky Mountain and Enbridge Pref

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

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

Diversification Opportunities for Rocky Mountain and Enbridge Pref

0.08

Correlation Coefficient

Rocky Mountain  Enbridge Pref

Significant diversification

The 3 months correlation between Rocky and Enbridge is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Rocky Mountain Liquor and Enbridge Pref L in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge Pref L and Rocky Mountain 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 Rocky Mountain Liquor are associated (or correlated) with Enbridge Pref. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enbridge Pref L has no effect on the direction of Rocky Mountain i.e., Rocky Mountain and Enbridge Pref go up and down completely randomly.

Pair Corralation between Rocky Mountain and Enbridge Pref

Assuming the 90 days horizon Rocky Mountain Liquor is expected to under-perform the Enbridge Pref. In addition to that, Rocky Mountain is 5.42 times more volatile than Enbridge Pref L. It trades about -0.02 of its total potential returns per unit of risk. Enbridge Pref L is currently generating about 0.1 per unit of volatility. If you would invest  2,128  in Enbridge Pref L on September 5, 2024 and sell it today you would earn a total of  87.00  from holding Enbridge Pref L or generate 4.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Rocky Mountain Liquor  vs.  Enbridge Pref L

Rocky Mountain Liquor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rocky Mountain Liquor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Rocky Mountain is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Enbridge Pref L

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge Pref L are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Enbridge Pref is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Rocky Mountain and Enbridge Pref

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

The idea behind Rocky Mountain Liquor and Enbridge Pref L 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.