Correlation Between Enbridge Pref and Birchcliff Energy

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

By analyzing existing cross correlation between Enbridge Pref 11 and Birchcliff Energy, you can compare the effects of market volatilities on Enbridge Pref and Birchcliff Energy 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 Pref with a short position of Birchcliff Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enbridge Pref and Birchcliff Energy.

Diversification Opportunities for Enbridge Pref and Birchcliff Energy

-0.45

Correlation Coefficient

Enbridge Pref  Birchcliff Energy

Very good diversification

The 3 months correlation between Enbridge and Birchcliff is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge Pref 11 and Birchcliff Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Birchcliff Energy and Enbridge Pref 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 Pref 11 are associated (or correlated) with Birchcliff Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Birchcliff Energy has no effect on the direction of Enbridge Pref i.e., Enbridge Pref and Birchcliff Energy go up and down completely randomly.

Pair Corralation between Enbridge Pref and Birchcliff Energy

Assuming the 90 days trading horizon Enbridge Pref 11 is expected to generate 0.29 times more return on investment than Birchcliff Energy. However, Enbridge Pref 11 is 3.4 times less risky than Birchcliff Energy. It trades about 0.47 of its potential returns per unit of risk. Birchcliff Energy is currently generating about -0.17 per unit of risk. If you would invest  1,820  in Enbridge Pref 11 on September 19, 2024 and sell it today you would earn a total of  125.00  from holding Enbridge Pref 11 or generate 6.87% return on investment over 90 days.

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

Enbridge Pref 11  vs.  Birchcliff Energy

Enbridge Pref 11

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge Pref 11 are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Enbridge Pref may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Birchcliff Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Birchcliff Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Enbridge Pref and Birchcliff Energy

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

The idea behind Enbridge Pref 11 and Birchcliff Energy 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.