Correlation Between Apple and Enbridge Pref

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

By analyzing existing cross correlation between Apple Inc CDR and Enbridge Pref Series, you can compare the effects of market volatilities on Apple and Enbridge Pref 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 Apple with a short position of Enbridge Pref. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Enbridge Pref.

Diversification Opportunities for Apple and Enbridge Pref

-0.79

Correlation Coefficient

Apple  Enbridge Pref

Pay attention - limited upside

The 3 months correlation between Apple and Enbridge is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc CDR and Enbridge Pref Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge Pref Series and Apple 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 Apple Inc CDR are associated (or correlated) with Enbridge Pref. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enbridge Pref Series has no effect on the direction of Apple i.e., Apple and Enbridge Pref go up and down completely randomly.

Pair Corralation between Apple and Enbridge Pref

Assuming the 90 days trading horizon Apple Inc CDR is expected to generate 1.59 times more return on investment than Enbridge Pref. However, Apple is 1.59 times more volatile than Enbridge Pref Series. It trades about 0.17 of its potential returns per unit of risk. Enbridge Pref Series is currently generating about -0.04 per unit of risk. If you would invest  3,324  in Apple Inc CDR on September 22, 2024 and sell it today you would earn a total of  407.00  from holding Apple Inc CDR or generate 12.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Apple Inc CDR  vs.  Enbridge Pref Series

Apple Inc CDR

Risk-Adjusted Performance

13 of 100

Good

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

Enbridge Pref Series

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enbridge Pref Series has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Enbridge Pref is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Apple and Enbridge Pref

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

The idea behind Apple Inc CDR and Enbridge Pref Series 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.