Correlation Between Enbridge Pref and Lycos Energy

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

By analyzing existing cross correlation between Enbridge Pref 5 and Lycos Energy, you can compare the effects of market volatilities on Enbridge Pref and Lycos 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 Lycos Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enbridge Pref and Lycos Energy.

Diversification Opportunities for Enbridge Pref and Lycos Energy

-0.34

Correlation Coefficient

Enbridge Pref  Lycos Energy

Very good diversification

The 3 months correlation between Enbridge and Lycos is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge Pref 5 and Lycos Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lycos 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 5 are associated (or correlated) with Lycos Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lycos Energy has no effect on the direction of Enbridge Pref i.e., Enbridge Pref and Lycos Energy go up and down completely randomly.

Pair Corralation between Enbridge Pref and Lycos Energy

Assuming the 90 days trading horizon Enbridge Pref 5 is expected to generate 0.14 times more return on investment than Lycos Energy. However, Enbridge Pref 5 is 7.0 times less risky than Lycos Energy. It trades about 0.24 of its potential returns per unit of risk. Lycos Energy is currently generating about 0.01 per unit of risk. If you would invest  2,245  in Enbridge Pref 5 on September 13, 2024 and sell it today you would earn a total of  149.00  from holding Enbridge Pref 5 or generate 6.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Enbridge Pref 5  vs.  Lycos Energy

Enbridge Pref 5

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge Pref 5 are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Enbridge Pref may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Lycos Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lycos Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Lycos Energy is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Enbridge Pref and Lycos Energy

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

The idea behind Enbridge Pref 5 and Lycos 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.

Check out your portfolio center.

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.