Correlation Between Enbridge and TVA
Can any of the company-specific risk be diversified away by investing in both Enbridge and TVA 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 TVA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Enbridge and TVA Group, you can compare the effects of market volatilities on Enbridge and TVA 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 TVA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enbridge and TVA.
Diversification Opportunities for Enbridge and TVA
Pay attention - limited upside
The 3 months correlation between Enbridge and TVA is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge and TVA Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TVA Group 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 TVA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TVA Group has no effect on the direction of Enbridge i.e., Enbridge and TVA go up and down completely randomly.
Pair Corralation between Enbridge and TVA
Assuming the 90 days trading horizon Enbridge is expected to generate 0.23 times more return on investment than TVA. However, Enbridge is 4.33 times less risky than TVA. It trades about 0.11 of its potential returns per unit of risk. TVA Group is currently generating about -0.04 per unit of risk. If you would invest 4,410 in Enbridge on September 12, 2024 and sell it today you would earn a total of 1,587 from holding Enbridge or generate 35.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 88.03% |
| Values | Daily Returns |
Enbridge vs. TVA Group
Performance |
| Timeline |
| Enbridge |
| TVA Group |
Enbridge and TVA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Enbridge and TVA
The main advantage of trading using opposite Enbridge and TVA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enbridge position performs unexpectedly, TVA 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 TVA will offset losses from the drop in TVA'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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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