Correlation Between Enbridge and Falcon Oil
Can any of the company-specific risk be diversified away by investing in both Enbridge and Falcon Oil 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 Falcon Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Enbridge and Falcon Oil Gas, you can compare the effects of market volatilities on Enbridge and Falcon Oil 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 Falcon Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enbridge and Falcon Oil.
Diversification Opportunities for Enbridge and Falcon Oil
-0.91 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Enbridge and Falcon is -0.91. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge and Falcon Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Falcon Oil Gas 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 Falcon Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Falcon Oil Gas has no effect on the direction of Enbridge i.e., Enbridge and Falcon Oil go up and down completely randomly.
Pair Corralation between Enbridge and Falcon Oil
Assuming the 90 days trading horizon Enbridge is expected to generate 0.52 times more return on investment than Falcon Oil. However, Enbridge is 1.93 times less risky than Falcon Oil. It trades about 0.38 of its potential returns per unit of risk. Falcon Oil Gas is currently generating about -0.19 per unit of risk. If you would invest 5,611 in Enbridge on August 28, 2024 and sell it today you would earn a total of 429.00 from holding Enbridge or generate 7.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 76.19% |
| Values | Daily Returns |
Enbridge vs. Falcon Oil Gas
Performance |
| Timeline |
| Enbridge |
| Falcon Oil Gas |
Enbridge and Falcon Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Enbridge and Falcon Oil
The main advantage of trading using opposite Enbridge and Falcon Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enbridge position performs unexpectedly, Falcon Oil 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 Falcon Oil will offset losses from the drop in Falcon Oil's long position.The idea behind Enbridge and Falcon Oil Gas 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.| Falcon Oil vs. Zoom Video Communications | Falcon Oil vs. Enbridge | Falcon Oil vs. Endo International PLC |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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