Correlation Between Enbridge Pref and Enbridge
Can any of the company-specific risk be diversified away by investing in both Enbridge Pref 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 Enbridge Pref and Enbridge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Enbridge Pref 1 and Enbridge, you can compare the effects of market volatilities on Enbridge Pref 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 Enbridge Pref with a short position of Enbridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enbridge Pref and Enbridge.
Diversification Opportunities for Enbridge Pref and Enbridge
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Enbridge and Enbridge is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge Pref 1 and Enbridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge 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 1 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 Enbridge Pref i.e., Enbridge Pref and Enbridge go up and down completely randomly.
Pair Corralation between Enbridge Pref and Enbridge
Assuming the 90 days trading horizon Enbridge Pref is expected to generate 1.81 times less return on investment than Enbridge. But when comparing it to its historical volatility, Enbridge Pref 1 is 1.69 times less risky than Enbridge. It trades about 0.21 of its potential returns per unit of risk. Enbridge is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 5,109 in Enbridge on November 3, 2024 and sell it today you would earn a total of 1,176 from holding Enbridge or generate 23.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Enbridge Pref 1 vs. Enbridge
Performance |
| Timeline |
| Enbridge Pref 1 |
| Enbridge |
Enbridge Pref and Enbridge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Enbridge Pref and Enbridge
The main advantage of trading using opposite Enbridge Pref and Enbridge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enbridge Pref 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.| Enbridge Pref vs. Pembina Pipeline Corp | Enbridge Pref vs. Pembina Pipeline Corp | Enbridge Pref vs. Pembina Pipeline Corp | Enbridge Pref vs. Pembina Pipeline Corp |
| Enbridge vs. Suncor Energy | Enbridge vs. Toronto Dominion Bank | Enbridge vs. Bank of Nova | Enbridge vs. BCE 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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