Correlation Between Pembina Pipeline and Acadian Timber
Can any of the company-specific risk be diversified away by investing in both Pembina Pipeline and Acadian Timber 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 Pembina Pipeline and Acadian Timber into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pembina Pipeline Corp and Acadian Timber Corp, you can compare the effects of market volatilities on Pembina Pipeline and Acadian Timber 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 Pembina Pipeline with a short position of Acadian Timber. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pembina Pipeline and Acadian Timber.
Diversification Opportunities for Pembina Pipeline and Acadian Timber
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Pembina and Acadian is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Pembina Pipeline Corp and Acadian Timber Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acadian Timber Corp and Pembina Pipeline 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 Pembina Pipeline Corp are associated (or correlated) with Acadian Timber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acadian Timber Corp has no effect on the direction of Pembina Pipeline i.e., Pembina Pipeline and Acadian Timber go up and down completely randomly.
Pair Corralation between Pembina Pipeline and Acadian Timber
Assuming the 90 days trading horizon Pembina Pipeline Corp is expected to generate 0.28 times more return on investment than Acadian Timber. However, Pembina Pipeline Corp is 3.53 times less risky than Acadian Timber. It trades about -0.45 of its potential returns per unit of risk. Acadian Timber Corp is currently generating about -0.15 per unit of risk. If you would invest 2,300 in Pembina Pipeline Corp on December 8, 2024 and sell it today you would lose (69.00) from holding Pembina Pipeline Corp or give up 3.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pembina Pipeline Corp vs. Acadian Timber Corp
Performance |
| Timeline |
| Pembina Pipeline Corp |
| Acadian Timber Corp |
Pembina Pipeline and Acadian Timber Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pembina Pipeline and Acadian Timber
The main advantage of trading using opposite Pembina Pipeline and Acadian Timber positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pembina Pipeline position performs unexpectedly, Acadian Timber 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 Acadian Timber will offset losses from the drop in Acadian Timber's long position.| Pembina Pipeline 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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