Correlation Between Enbridge and Broadridge Financial

Can any of the company-specific risk be diversified away by investing in both Enbridge and Broadridge Financial 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 Broadridge Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Enbridge and Broadridge Financial Solutions, you can compare the effects of market volatilities on Enbridge and Broadridge Financial 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 Broadridge Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enbridge and Broadridge Financial.

Diversification Opportunities for Enbridge and Broadridge Financial

0.91

Correlation Coefficient

Enbridge  Broadridge Financial

Almost no diversification

The 3 months correlation between Enbridge and Broadridge is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge and Broadridge Financial Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadridge Financial 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 Broadridge Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Broadridge Financial has no effect on the direction of Enbridge i.e., Enbridge and Broadridge Financial go up and down completely randomly.

Pair Corralation between Enbridge and Broadridge Financial

Assuming the 90 days trading horizon Enbridge is expected to generate 1.11 times more return on investment than Broadridge Financial. However, Enbridge is 1.11 times more volatile than Broadridge Financial Solutions. It trades about 0.17 of its potential returns per unit of risk. Broadridge Financial Solutions is currently generating about 0.11 per unit of risk. If you would invest  5,409  in Enbridge on September 23, 2024 and sell it today you would earn a total of  461.00  from holding Enbridge or generate 8.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	69.7%
Values	Daily Returns

Enbridge  vs.  Broadridge Financial Solutions

Enbridge

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Enbridge may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Broadridge Financial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Broadridge Financial Solutions are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Broadridge Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Enbridge and Broadridge Financial

The main advantage of trading using opposite Enbridge and Broadridge Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enbridge position performs unexpectedly, Broadridge Financial 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 Broadridge Financial will offset losses from the drop in Broadridge Financial's long position.

The idea behind Enbridge and Broadridge Financial Solutions pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.