Correlation Between Chemtrade Logistics and Pembina Pipeline

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

By analyzing existing cross correlation between Chemtrade Logistics Income and Pembina Pipeline Corp, you can compare the effects of market volatilities on Chemtrade Logistics and Pembina Pipeline 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 Chemtrade Logistics with a short position of Pembina Pipeline. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chemtrade Logistics and Pembina Pipeline.

Diversification Opportunities for Chemtrade Logistics and Pembina Pipeline

0.86

Correlation Coefficient

Chemtrade Logistics  Pembina Pipeline

Very poor diversification

The 3 months correlation between Chemtrade and Pembina is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Chemtrade Logistics Income and Pembina Pipeline Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pembina Pipeline Corp and Chemtrade Logistics 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 Chemtrade Logistics Income are associated (or correlated) with Pembina Pipeline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pembina Pipeline Corp has no effect on the direction of Chemtrade Logistics i.e., Chemtrade Logistics and Pembina Pipeline go up and down completely randomly.

Pair Corralation between Chemtrade Logistics and Pembina Pipeline

Assuming the 90 days trading horizon Chemtrade Logistics Income is expected to generate 1.32 times more return on investment than Pembina Pipeline. However, Chemtrade Logistics is 1.32 times more volatile than Pembina Pipeline Corp. It trades about 0.25 of its potential returns per unit of risk. Pembina Pipeline Corp is currently generating about 0.12 per unit of risk. If you would invest  982.00  in Chemtrade Logistics Income on August 31, 2024 and sell it today you would earn a total of  194.00  from holding Chemtrade Logistics Income or generate 19.76% return on investment over 90 days.

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

Chemtrade Logistics Income  vs.  Pembina Pipeline Corp

Chemtrade Logistics

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Chemtrade Logistics Income are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal technical and fundamental indicators, Chemtrade Logistics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pembina Pipeline Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pembina Pipeline Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal essential indicators, Pembina Pipeline may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Chemtrade Logistics and Pembina Pipeline

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

The idea behind Chemtrade Logistics Income and Pembina Pipeline Corp 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.