Correlation Between Enbridge Pref and VVC Exploration

Can any of the company-specific risk be diversified away by investing in both Enbridge Pref and VVC Exploration 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 VVC Exploration 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 VVC Exploration Corp, you can compare the effects of market volatilities on Enbridge Pref and VVC Exploration 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 VVC Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enbridge Pref and VVC Exploration.

Diversification Opportunities for Enbridge Pref and VVC Exploration

-0.24

Correlation Coefficient

Enbridge Pref  VVC Exploration

Very good diversification

The 3 months correlation between Enbridge and VVC is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge Pref 11 and VVC Exploration Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VVC Exploration Corp 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 VVC Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VVC Exploration Corp has no effect on the direction of Enbridge Pref i.e., Enbridge Pref and VVC Exploration go up and down completely randomly.

Pair Corralation between Enbridge Pref and VVC Exploration

Assuming the 90 days trading horizon Enbridge Pref is expected to generate 1.22 times less return on investment than VVC Exploration. But when comparing it to its historical volatility, Enbridge Pref 11 is 14.78 times less risky than VVC Exploration. It trades about 0.17 of its potential returns per unit of risk. VVC Exploration Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  3.00  in VVC Exploration Corp on September 25, 2024 and sell it today you would lose (0.50) from holding VVC Exploration Corp or give up 16.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Enbridge Pref 11  vs.  VVC Exploration Corp

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.

VVC Exploration Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in VVC Exploration Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, VVC Exploration may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Enbridge Pref and VVC Exploration

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

The idea behind Enbridge Pref 11 and VVC Exploration 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.