Correlation Between Enbridge Pref and NuVista Energy

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Can any of the company-specific risk be diversified away by investing in both Enbridge Pref and NuVista Energy 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 Pref and NuVista Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Enbridge Pref 5 and NuVista Energy, you can compare the effects of market volatilities on Enbridge Pref and NuVista Energy 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 Pref with a short position of NuVista Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enbridge Pref and NuVista Energy.

Diversification Opportunities for Enbridge Pref and NuVista Energy

EnbridgeNuVistaDiversified AwayEnbridgeNuVistaDiversified Away100%
-0.5
  Correlation Coefficient

Very good diversification

The 3 months correlation between Enbridge and NuVista is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge Pref 5 and NuVista Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NuVista Energy and Enbridge Pref 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 Pref 5 are associated (or correlated) with NuVista Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NuVista Energy has no effect on the direction of Enbridge Pref i.e., Enbridge Pref and NuVista Energy go up and down completely randomly.

Pair Corralation between Enbridge Pref and NuVista Energy

Assuming the 90 days trading horizon Enbridge Pref 5 is expected to generate 0.21 times more return on investment than NuVista Energy. However, Enbridge Pref 5 is 4.8 times less risky than NuVista Energy. It trades about 0.19 of its potential returns per unit of risk. NuVista Energy is currently generating about -0.23 per unit of risk. If you would invest  2,363  in Enbridge Pref 5 on November 29, 2024 and sell it today you would earn a total of  36.00  from holding Enbridge Pref 5 or generate 1.52% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy95.24%
ValuesDaily Returns

Enbridge Pref 5  vs.  NuVista Energy

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -10-50
JavaScript chart by amCharts 3.21.15ENB-PFV NVA
       Timeline  
Enbridge Pref 5 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge Pref 5 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Enbridge Pref is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb23.323.423.523.623.723.823.92424.1
NuVista Energy 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days NuVista Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb1212.51313.51414.5

Enbridge Pref and NuVista Energy Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-1.15-0.82-0.49-0.160.02120.270.60.931.26 0.51.01.52.02.5
JavaScript chart by amCharts 3.21.15ENB-PFV NVA
       Returns  

Pair Trading with Enbridge Pref and NuVista Energy

The main advantage of trading using opposite Enbridge Pref and NuVista Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enbridge Pref position performs unexpectedly, NuVista Energy 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 NuVista Energy will offset losses from the drop in NuVista Energy's long position.
The idea behind Enbridge Pref 5 and NuVista Energy 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.
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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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