Correlation Between Williams Companies and Enbridge
Can any of the company-specific risk be diversified away by investing in both Williams Companies 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 Williams Companies and Enbridge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Williams Companies and Enbridge, you can compare the effects of market volatilities on Williams Companies 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 Williams Companies with a short position of Enbridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Williams Companies and Enbridge.
Diversification Opportunities for Williams Companies and Enbridge
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Williams and Enbridge is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Williams Companies and Enbridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge and Williams Companies 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 Williams Companies 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 Williams Companies i.e., Williams Companies and Enbridge go up and down completely randomly.
Pair Corralation between Williams Companies and Enbridge
Considering the 90-day investment horizon Williams Companies is expected to generate 1.12 times more return on investment than Enbridge. However, Williams Companies is 1.12 times more volatile than Enbridge. It trades about 0.12 of its potential returns per unit of risk. Enbridge is currently generating about 0.05 per unit of risk. If you would invest 3,020 in Williams Companies on August 27, 2024 and sell it today you would earn a total of 2,945 from holding Williams Companies or generate 97.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Williams Companies vs. Enbridge
Performance |
| Timeline |
| Williams Companies |
| Enbridge |
Williams Companies and Enbridge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Williams Companies and Enbridge
The main advantage of trading using opposite Williams Companies and Enbridge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Williams Companies 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.| Williams Companies vs. Enterprise Products Partners | Williams Companies vs. ONEOK Inc | Williams Companies vs. Energy Transfer LP | Williams Companies vs. Enbridge |
| 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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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