Correlation Between Yellow Pages and Enbridge

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

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

Diversification Opportunities for Yellow Pages and Enbridge

0.7

Correlation Coefficient

Yellow Pages  Enbridge

Poor diversification

The 3 months correlation between Yellow and Enbridge is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Yellow Pages Limited and Enbridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge and Yellow Pages 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 Yellow Pages Limited 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 Yellow Pages i.e., Yellow Pages and Enbridge go up and down completely randomly.

Pair Corralation between Yellow Pages and Enbridge

Assuming the 90 days horizon Yellow Pages is expected to generate 7.39 times less return on investment than Enbridge. In addition to that, Yellow Pages is 1.87 times more volatile than Enbridge. It trades about 0.0 of its total potential returns per unit of risk. Enbridge is currently generating about 0.04 per unit of volatility. 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	65.85%
Values	Daily Returns

Yellow Pages Limited  vs.  Enbridge

Yellow Pages Limited

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Yellow Pages Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Yellow Pages may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 Yellow Pages and Enbridge

The main advantage of trading using opposite Yellow Pages and Enbridge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yellow Pages 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 Yellow Pages Limited 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.