Correlation Between Snap On and Pembina Pipeline

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

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

Diversification Opportunities for Snap On and Pembina Pipeline

-0.73

Correlation Coefficient

Snap On  Pembina Pipeline

Pay attention - limited upside

The 3 months correlation between Snap and Pembina is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Snap On and Pembina Pipeline in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pembina Pipeline and Snap On 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 Snap On are associated (or correlated) with Pembina Pipeline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pembina Pipeline has no effect on the direction of Snap On i.e., Snap On and Pembina Pipeline go up and down completely randomly.

Pair Corralation between Snap On and Pembina Pipeline

Considering the 90-day investment horizon Snap On is expected to under-perform the Pembina Pipeline. In addition to that, Snap On is 16.61 times more volatile than Pembina Pipeline. It trades about -0.29 of its total potential returns per unit of risk. Pembina Pipeline is currently generating about 0.22 per unit of volatility. If you would invest  1,579  in Pembina Pipeline on October 9, 2024 and sell it today you would earn a total of  4.00  from holding Pembina Pipeline or generate 0.25% return on investment over 90 days.

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

Snap On  vs.  Pembina Pipeline

Snap On

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Snap On are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Snap On sustained solid returns over the last few months and may actually be approaching a breakup point.

Pembina Pipeline

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pembina Pipeline has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Pembina Pipeline is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Snap On and Pembina Pipeline

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

The idea behind Snap On and Pembina Pipeline 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 Directory module to find actively traded commodities issued by global exchanges.