Correlation Between Dow Jones and Enbridge
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and Enbridge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Enbridge, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of Enbridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Enbridge.
Diversification Opportunities for Dow Jones and Enbridge
Very weak diversification
The 3 months correlation between Dow and Enbridge is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Enbridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge and Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and Enbridge go up and down completely randomly.
Pair Corralation between Dow Jones and Enbridge
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.8 times more return on investment than Enbridge. However, Dow Jones Industrial is 1.25 times less risky than Enbridge. It trades about 0.42 of its potential returns per unit of risk. Enbridge is currently generating about 0.21 per unit of risk. If you would invest 4,239,227 in Dow Jones Industrial on November 2, 2024 and sell it today you would earn a total of 248,986 from holding Dow Jones Industrial or generate 5.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Enbridge
Performance |
| Timeline |
Dow Jones and Enbridge Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Enbridge
Pair trading matchups for Enbridge
Pair Trading with Dow Jones and Enbridge
The main advantage of trading using opposite Dow Jones and Enbridge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. Boston Properties | Dow Jones vs. Suntory Beverage Food | Dow Jones vs. Envista Holdings Corp | Dow Jones vs. Fevertree Drinks Plc |
| Enbridge vs. Energy Transfer LP | Enbridge vs. Kinder Morgan | Enbridge vs. MPLX LP | Enbridge vs. Pembina Pipeline Corp |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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