Correlation Between Cheniere Energy and Enbridge
Can any of the company-specific risk be diversified away by investing in both Cheniere Energy 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 Cheniere Energy and Enbridge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cheniere Energy and Enbridge, you can compare the effects of market volatilities on Cheniere Energy 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 Cheniere Energy with a short position of Enbridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cheniere Energy and Enbridge.
Diversification Opportunities for Cheniere Energy and Enbridge
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Cheniere and Enbridge is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Cheniere Energy and Enbridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge and Cheniere Energy 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 Cheniere Energy 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 Cheniere Energy i.e., Cheniere Energy and Enbridge go up and down completely randomly.
Pair Corralation between Cheniere Energy and Enbridge
Assuming the 90 days trading horizon Cheniere Energy is expected to generate 1.71 times more return on investment than Enbridge. However, Cheniere Energy is 1.71 times more volatile than Enbridge. It trades about 0.17 of its potential returns per unit of risk. Enbridge is currently generating about 0.19 per unit of risk. If you would invest 14,104 in Cheniere Energy on August 28, 2024 and sell it today you would earn a total of 6,556 from holding Cheniere Energy or generate 46.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.22% |
| Values | Daily Returns |
Cheniere Energy vs. Enbridge
Performance |
| Timeline |
| Cheniere Energy |
| Enbridge |
Cheniere Energy and Enbridge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cheniere Energy and Enbridge
The main advantage of trading using opposite Cheniere Energy and Enbridge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cheniere Energy 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.| Cheniere Energy vs. Kinder Morgan | Cheniere Energy vs. The Williams Companies | Cheniere Energy vs. ONEOK Inc |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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