Correlation Between Enbridge Pref and Air Canada
Can any of the company-specific risk be diversified away by investing in both Enbridge Pref and Air Canada 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 Air Canada into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Enbridge Pref 7 and Air Canada, you can compare the effects of market volatilities on Enbridge Pref and Air Canada 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 Air Canada. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enbridge Pref and Air Canada.
Diversification Opportunities for Enbridge Pref and Air Canada
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Enbridge and Air is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge Pref 7 and Air Canada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Canada 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 7 are associated (or correlated) with Air Canada. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Canada has no effect on the direction of Enbridge Pref i.e., Enbridge Pref and Air Canada go up and down completely randomly.
Pair Corralation between Enbridge Pref and Air Canada
Assuming the 90 days trading horizon Enbridge Pref 7 is expected to generate 0.23 times more return on investment than Air Canada. However, Enbridge Pref 7 is 4.29 times less risky than Air Canada. It trades about 0.42 of its potential returns per unit of risk. Air Canada is currently generating about -0.06 per unit of risk. If you would invest 1,923 in Enbridge Pref 7 on October 11, 2024 and sell it today you would earn a total of 166.00 from holding Enbridge Pref 7 or generate 8.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Enbridge Pref 7 vs. Air Canada
Performance |
| Timeline |
| Enbridge Pref 7 |
| Air Canada |
Enbridge Pref and Air Canada Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Enbridge Pref and Air Canada
The main advantage of trading using opposite Enbridge Pref and Air Canada positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enbridge Pref position performs unexpectedly, Air Canada 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 Air Canada will offset losses from the drop in Air Canada's long position.| Enbridge Pref vs. Canadian Utilities Limited | Enbridge Pref vs. TUT Fitness Group | Enbridge Pref vs. VIP Entertainment Technologies | Enbridge Pref vs. DRI Healthcare Trust |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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