Correlation Between Frontline and Enbridge
Can any of the company-specific risk be diversified away by investing in both Frontline 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 Frontline and Enbridge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Frontline and Enbridge, you can compare the effects of market volatilities on Frontline 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 Frontline with a short position of Enbridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Frontline and Enbridge.
Diversification Opportunities for Frontline and Enbridge
Excellent diversification
The 3 months correlation between Frontline and Enbridge is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Frontline and Enbridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge and Frontline 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 Frontline 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 Frontline i.e., Frontline and Enbridge go up and down completely randomly.
Pair Corralation between Frontline and Enbridge
Considering the 90-day investment horizon Frontline is expected to under-perform the Enbridge. In addition to that, Frontline is 2.33 times more volatile than Enbridge. It trades about -0.06 of its total potential returns per unit of risk. Enbridge is currently generating about 0.35 per unit of volatility. If you would invest 4,032 in Enbridge on August 26, 2024 and sell it today you would earn a total of 294.00 from holding Enbridge or generate 7.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Frontline vs. Enbridge
Performance |
| Timeline |
| Frontline |
| Enbridge |
Frontline and Enbridge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Frontline and Enbridge
The main advantage of trading using opposite Frontline and Enbridge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Frontline 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.| Frontline vs. Teekay Tankers | Frontline vs. DHT Holdings | Frontline vs. International Seaways | Frontline vs. Scorpio Tankers |
| Enbridge vs. Energy Transfer LP | Enbridge vs. Kinder Morgan | Enbridge vs. MPLX LP | Enbridge vs. Pembina Pipeline Corp |
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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