Correlation Between TC Energy and Enbridge

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

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

Diversification Opportunities for TC Energy and Enbridge

0.69

Correlation Coefficient

TC Energy  Enbridge

Poor diversification

The 3 months correlation between TRP-PC and Enbridge is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding TC Energy Corp and Enbridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge and TC Energy 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 TC Energy Corp 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 TC Energy i.e., TC Energy and Enbridge go up and down completely randomly.

Pair Corralation between TC Energy and Enbridge

Assuming the 90 days trading horizon TC Energy is expected to generate 1.33 times less return on investment than Enbridge. But when comparing it to its historical volatility, TC Energy Corp is 1.89 times less risky than Enbridge. It trades about 0.05 of its potential returns per unit of risk. Enbridge is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,703  in Enbridge on September 28, 2024 and sell it today you would earn a total of  543.00  from holding Enbridge or generate 31.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.19%
Values	Daily Returns

TC Energy Corp  vs.  Enbridge

TC Energy Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TC Energy Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, TC Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Enbridge

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Enbridge is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with TC Energy and Enbridge

The main advantage of trading using opposite TC Energy and Enbridge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TC Energy 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 TC Energy Corp 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.