Correlation Between Talon Metals and Enbridge Pref

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

By analyzing existing cross correlation between Talon Metals Corp and Enbridge Pref 5, you can compare the effects of market volatilities on Talon Metals 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 Talon Metals with a short position of Enbridge Pref. Check out your portfolio center. Please also check ongoing floating volatility patterns of Talon Metals and Enbridge Pref.

Diversification Opportunities for Talon Metals and Enbridge Pref

0.15

Correlation Coefficient

Talon Metals  Enbridge Pref

Average diversification

The 3 months correlation between Talon and Enbridge is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Talon Metals Corp and Enbridge Pref 5 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge Pref 5 and Talon Metals 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 Talon Metals Corp 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 5 has no effect on the direction of Talon Metals i.e., Talon Metals and Enbridge Pref go up and down completely randomly.

Pair Corralation between Talon Metals and Enbridge Pref

Assuming the 90 days trading horizon Talon Metals Corp is expected to generate 11.88 times more return on investment than Enbridge Pref. However, Talon Metals is 11.88 times more volatile than Enbridge Pref 5. It trades about 0.12 of its potential returns per unit of risk. Enbridge Pref 5 is currently generating about 0.19 per unit of risk. If you would invest  8.00  in Talon Metals Corp on October 7, 2024 and sell it today you would earn a total of  1.50  from holding Talon Metals Corp or generate 18.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.12%
Values	Daily Returns

Talon Metals Corp  vs.  Enbridge Pref 5

Talon Metals Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Talon Metals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Enbridge Pref 5

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge Pref 5 are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Enbridge Pref is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Talon Metals and Enbridge Pref

The main advantage of trading using opposite Talon Metals and Enbridge Pref positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Talon Metals 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 Talon Metals Corp and Enbridge Pref 5 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .