Correlation Between Caledonia Investments and Enbridge
Can any of the company-specific risk be diversified away by investing in both Caledonia Investments 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 Caledonia Investments and Enbridge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caledonia Investments and Enbridge, you can compare the effects of market volatilities on Caledonia Investments 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 Caledonia Investments with a short position of Enbridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caledonia Investments and Enbridge.
Diversification Opportunities for Caledonia Investments and Enbridge
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Caledonia and Enbridge is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Caledonia Investments and Enbridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge and Caledonia Investments 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 Caledonia Investments 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 Caledonia Investments i.e., Caledonia Investments and Enbridge go up and down completely randomly.
Pair Corralation between Caledonia Investments and Enbridge
Assuming the 90 days trading horizon Caledonia Investments is expected to generate 2.95 times less return on investment than Enbridge. In addition to that, Caledonia Investments is 1.21 times more volatile than Enbridge. It trades about 0.22 of its total potential returns per unit of risk. Enbridge is currently generating about 0.78 per unit of volatility. If you would invest 5,870 in Enbridge on October 21, 2024 and sell it today you would earn a total of 490.00 from holding Enbridge or generate 8.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 68.42% |
| Values | Daily Returns |
Caledonia Investments vs. Enbridge
Performance |
| Timeline |
| Caledonia Investments |
| Enbridge |
Caledonia Investments and Enbridge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caledonia Investments and Enbridge
The main advantage of trading using opposite Caledonia Investments and Enbridge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caledonia Investments 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.| Caledonia Investments vs. Bioventix | Caledonia Investments vs. VeriSign | Caledonia Investments vs. Games Workshop Group | Caledonia Investments vs. AJ Bell plc |
| Enbridge vs. Catalyst Media Group | Enbridge vs. Bloomsbury Publishing Plc | Enbridge vs. JD Sports Fashion | Enbridge vs. Host Hotels Resorts |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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