Correlation Between IShares Canadian and Enbridge Pref

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

By analyzing existing cross correlation between iShares Canadian HYBrid and Enbridge Pref 13, you can compare the effects of market volatilities on IShares Canadian 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 IShares Canadian with a short position of Enbridge Pref. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Canadian and Enbridge Pref.

Diversification Opportunities for IShares Canadian and Enbridge Pref

0.79

Correlation Coefficient

IShares Canadian  Enbridge Pref

Poor diversification

The 3 months correlation between IShares and Enbridge is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding iShares Canadian HYBrid and Enbridge Pref 13 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge Pref 13 and IShares Canadian 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 iShares Canadian HYBrid 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 13 has no effect on the direction of IShares Canadian i.e., IShares Canadian and Enbridge Pref go up and down completely randomly.

Pair Corralation between IShares Canadian and Enbridge Pref

Assuming the 90 days trading horizon iShares Canadian HYBrid is expected to under-perform the Enbridge Pref. But the etf apears to be less risky and, when comparing its historical volatility, iShares Canadian HYBrid is 2.76 times less risky than Enbridge Pref. The etf trades about -0.11 of its potential returns per unit of risk. The Enbridge Pref 13 is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  1,850  in Enbridge Pref 13 on October 1, 2024 and sell it today you would earn a total of  47.00  from holding Enbridge Pref 13 or generate 2.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.74%
Values	Daily Returns

iShares Canadian HYBrid  vs.  Enbridge Pref 13

iShares Canadian HYBrid

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Canadian HYBrid are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental drivers, IShares Canadian is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Enbridge Pref 13

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge Pref 13 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Enbridge Pref is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IShares Canadian and Enbridge Pref

The main advantage of trading using opposite IShares Canadian and Enbridge Pref positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Canadian 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 iShares Canadian HYBrid and Enbridge Pref 13 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.