Correlation Between Enbridge and Forum Energy
Can any of the company-specific risk be diversified away by investing in both Enbridge and Forum 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 and Forum Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Enbridge and Forum Energy Metals, you can compare the effects of market volatilities on Enbridge and Forum 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 with a short position of Forum Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enbridge and Forum Energy.
Diversification Opportunities for Enbridge and Forum Energy
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Enbridge and Forum is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge and Forum Energy Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forum Energy Metals and Enbridge 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 are associated (or correlated) with Forum Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forum Energy Metals has no effect on the direction of Enbridge i.e., Enbridge and Forum Energy go up and down completely randomly.
Pair Corralation between Enbridge and Forum Energy
Assuming the 90 days trading horizon Enbridge is expected to generate 0.11 times more return on investment than Forum Energy. However, Enbridge is 9.13 times less risky than Forum Energy. It trades about 0.46 of its potential returns per unit of risk. Forum Energy Metals is currently generating about -0.22 per unit of risk. If you would invest 5,557 in Enbridge on September 2, 2024 and sell it today you would earn a total of 500.00 from holding Enbridge or generate 9.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Enbridge vs. Forum Energy Metals
Performance |
| Timeline |
| Enbridge |
| Forum Energy Metals |
Enbridge and Forum Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Enbridge and Forum Energy
The main advantage of trading using opposite Enbridge and Forum Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enbridge position performs unexpectedly, Forum 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 Forum Energy will offset losses from the drop in Forum Energy's long position.| 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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