Correlation Between Enbridge and Pembina Pipeline
Can any of the company-specific risk be diversified away by investing in both Enbridge and Pembina Pipeline 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 Pembina Pipeline into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Enbridge and Pembina Pipeline, you can compare the effects of market volatilities on Enbridge and Pembina Pipeline 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 Pembina Pipeline. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enbridge and Pembina Pipeline.
Diversification Opportunities for Enbridge and Pembina Pipeline
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Enbridge and Pembina is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge and Pembina Pipeline in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pembina Pipeline 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 Pembina Pipeline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pembina Pipeline has no effect on the direction of Enbridge i.e., Enbridge and Pembina Pipeline go up and down completely randomly.
Pair Corralation between Enbridge and Pembina Pipeline
Considering the 90-day investment horizon Enbridge is expected to generate 1.0 times less return on investment than Pembina Pipeline. But when comparing it to its historical volatility, Enbridge is 2.19 times less risky than Pembina Pipeline. It trades about 0.36 of its potential returns per unit of risk. Pembina Pipeline is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 1,682 in Pembina Pipeline on August 31, 2024 and sell it today you would earn a total of 118.00 from holding Pembina Pipeline or generate 7.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Enbridge vs. Pembina Pipeline
Performance |
| Timeline |
| Enbridge |
| Pembina Pipeline |
Enbridge and Pembina Pipeline Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Enbridge and Pembina Pipeline
The main advantage of trading using opposite Enbridge and Pembina Pipeline positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enbridge position performs unexpectedly, Pembina Pipeline 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 Pembina Pipeline will offset losses from the drop in Pembina Pipeline's long position.| Enbridge vs. Energy Transfer LP | Enbridge vs. Kinder Morgan | Enbridge vs. MPLX LP | Enbridge vs. Pembina Pipeline Corp |
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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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