Correlation Between Canoe EIT and Enbridge Srs

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

By analyzing existing cross correlation between Canoe EIT Income and Enbridge Srs P, you can compare the effects of market volatilities on Canoe EIT and Enbridge Srs 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 Canoe EIT with a short position of Enbridge Srs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canoe EIT and Enbridge Srs.

Diversification Opportunities for Canoe EIT and Enbridge Srs

-0.55

Correlation Coefficient

Canoe EIT  Enbridge Srs

Excellent diversification

The 3 months correlation between Canoe and Enbridge is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Canoe EIT Income and Enbridge Srs P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge Srs P and Canoe EIT 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 Canoe EIT Income are associated (or correlated) with Enbridge Srs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enbridge Srs P has no effect on the direction of Canoe EIT i.e., Canoe EIT and Enbridge Srs go up and down completely randomly.

Pair Corralation between Canoe EIT and Enbridge Srs

Assuming the 90 days trading horizon Canoe EIT Income is expected to under-perform the Enbridge Srs. In addition to that, Canoe EIT is 1.18 times more volatile than Enbridge Srs P. It trades about -0.18 of its total potential returns per unit of risk. Enbridge Srs P is currently generating about 0.36 per unit of volatility. If you would invest  1,938  in Enbridge Srs P on September 25, 2024 and sell it today you would earn a total of  63.00  from holding Enbridge Srs P or generate 3.25% return on investment over 90 days.

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

Canoe EIT Income  vs.  Enbridge Srs P

Canoe EIT Income

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Canoe EIT Income are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, Canoe EIT may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Enbridge Srs P

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge Srs P are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Enbridge Srs is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Canoe EIT and Enbridge Srs

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

The idea behind Canoe EIT Income and Enbridge Srs P 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.