Correlation Between Exxon and Enbridge Srs

Can any of the company-specific risk be diversified away by investing in both Exxon and Enbridge Srs 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 Srs 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 Srs N, you can compare the effects of market volatilities on Exxon and Enbridge Srs 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 Srs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and Enbridge Srs.

Diversification Opportunities for Exxon and Enbridge Srs

-0.78

Correlation Coefficient

Exxon  Enbridge Srs

Pay attention - limited upside

The 3 months correlation between Exxon and Enbridge is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding EXXON MOBIL CDR and Enbridge Srs N in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge Srs N 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 Srs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enbridge Srs N has no effect on the direction of Exxon i.e., Exxon and Enbridge Srs go up and down completely randomly.

Pair Corralation between Exxon and Enbridge Srs

Assuming the 90 days trading horizon EXXON MOBIL CDR is expected to under-perform the Enbridge Srs. In addition to that, Exxon is 1.97 times more volatile than Enbridge Srs N. It trades about -0.22 of its total potential returns per unit of risk. Enbridge Srs N is currently generating about 0.42 per unit of volatility. If you would invest  2,121  in Enbridge Srs N on October 6, 2024 and sell it today you would earn a total of  199.00  from holding Enbridge Srs N or generate 9.38% return on investment over 90 days.

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

EXXON MOBIL CDR  vs.  Enbridge Srs N

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 abnormal 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 Srs N

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge Srs N are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Enbridge Srs is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Exxon and Enbridge Srs

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

The idea behind EXXON MOBIL CDR and Enbridge Srs N 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.