Correlation Between Exxon and Enbridge H

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

By analyzing existing cross correlation between EXXON MOBIL CDR and Enbridge H Cum, you can compare the effects of market volatilities on Exxon and Enbridge H 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 Exxon with a short position of Enbridge H. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and Enbridge H.

Diversification Opportunities for Exxon and Enbridge H

-0.65

Correlation Coefficient

Exxon  Enbridge H

Excellent diversification

The 3 months correlation between Exxon and Enbridge is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding EXXON MOBIL CDR and Enbridge H Cum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge H Cum and Exxon 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 EXXON MOBIL CDR are associated (or correlated) with Enbridge H. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enbridge H Cum has no effect on the direction of Exxon i.e., Exxon and Enbridge H go up and down completely randomly.

Pair Corralation between Exxon and Enbridge H

Assuming the 90 days trading horizon Exxon is expected to generate 4.65 times less return on investment than Enbridge H. In addition to that, Exxon is 5.57 times more volatile than Enbridge H Cum. It trades about 0.0 of its total potential returns per unit of risk. Enbridge H Cum is currently generating about 0.08 per unit of volatility. If you would invest  1,476  in Enbridge H Cum on October 4, 2024 and sell it today you would earn a total of  594.00  from holding Enbridge H Cum or generate 40.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	97.98%
Values	Daily Returns

EXXON MOBIL CDR  vs.  Enbridge H Cum

EXXON MOBIL CDR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EXXON MOBIL CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Enbridge H Cum

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge H Cum are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Enbridge H is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Exxon and Enbridge H

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

The idea behind EXXON MOBIL CDR and Enbridge H Cum 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.