Correlation Between Enbridge and Contango Holdings
Can any of the company-specific risk be diversified away by investing in both Enbridge and Contango Holdings 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 Enbridge and Contango Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Enbridge and Contango Holdings PLC, you can compare the effects of market volatilities on Enbridge and Contango Holdings 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 Enbridge with a short position of Contango Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enbridge and Contango Holdings.
Diversification Opportunities for Enbridge and Contango Holdings
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Enbridge and Contango is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge and Contango Holdings PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Contango Holdings PLC and Enbridge 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 Enbridge are associated (or correlated) with Contango Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Contango Holdings PLC has no effect on the direction of Enbridge i.e., Enbridge and Contango Holdings go up and down completely randomly.
Pair Corralation between Enbridge and Contango Holdings
Assuming the 90 days trading horizon Enbridge is expected to generate 0.29 times more return on investment than Contango Holdings. However, Enbridge is 3.43 times less risky than Contango Holdings. It trades about 0.07 of its potential returns per unit of risk. Contango Holdings PLC is currently generating about -0.04 per unit of risk. If you would invest 4,757 in Enbridge on August 26, 2024 and sell it today you would earn a total of 1,283 from holding Enbridge or generate 26.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 55.02% |
| Values | Daily Returns |
Enbridge vs. Contango Holdings PLC
Performance |
| Timeline |
| Enbridge |
| Contango Holdings PLC |
Enbridge and Contango Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Enbridge and Contango Holdings
The main advantage of trading using opposite Enbridge and Contango Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enbridge position performs unexpectedly, Contango Holdings 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 Contango Holdings will offset losses from the drop in Contango Holdings' long position.The idea behind Enbridge and Contango Holdings PLC 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.| Contango Holdings vs. Zoom Video Communications | Contango Holdings vs. Enbridge | Contango Holdings vs. Endo International PLC | Contango Holdings vs. Diversified Energy |
Check out your portfolio center.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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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