Correlation Between Enbridge and TC Energy
Can any of the company-specific risk be diversified away by investing in both Enbridge and TC 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 TC Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Enbridge and TC Energy Corp, you can compare the effects of market volatilities on Enbridge and TC 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 TC Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enbridge and TC Energy.
Diversification Opportunities for Enbridge and TC Energy
Very poor diversification
The 3 months correlation between Enbridge and TRP is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge and TC Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TC Energy Corp 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 TC Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TC Energy Corp has no effect on the direction of Enbridge i.e., Enbridge and TC Energy go up and down completely randomly.
Pair Corralation between Enbridge and TC Energy
Considering the 90-day investment horizon Enbridge is expected to generate 1.89 times less return on investment than TC Energy. But when comparing it to its historical volatility, Enbridge is 1.44 times less risky than TC Energy. It trades about 0.2 of its potential returns per unit of risk. TC Energy Corp is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 3,370 in TC Energy Corp on August 30, 2024 and sell it today you would earn a total of 1,504 from holding TC Energy Corp or generate 44.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Enbridge vs. TC Energy Corp
Performance |
| Timeline |
| Enbridge |
| TC Energy Corp |
Enbridge and TC Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Enbridge and TC Energy
The main advantage of trading using opposite Enbridge and TC Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enbridge position performs unexpectedly, TC 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 TC Energy will offset losses from the drop in TC Energy's long position.| Enbridge vs. Energy Transfer LP | Enbridge vs. Kinder Morgan | Enbridge vs. MPLX LP | Enbridge vs. Pembina Pipeline Corp |
| TC Energy vs. Plains All American | TC Energy vs. Genesis Energy LP | TC Energy vs. Hess Midstream Partners | TC Energy vs. Kinder Morgan |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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