Correlation Between Enbridge Pref and Enbridge Srs

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

By analyzing existing cross correlation between Enbridge Pref 1 and Enbridge Srs P, you can compare the effects of market volatilities on Enbridge Pref 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 Enbridge Pref with a short position of Enbridge Srs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enbridge Pref and Enbridge Srs.

Diversification Opportunities for Enbridge Pref and Enbridge Srs

-0.53

Correlation Coefficient

Enbridge Pref  Enbridge Srs

Excellent diversification

The 3 months correlation between Enbridge and Enbridge is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge Pref 1 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 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 1 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 Enbridge Pref i.e., Enbridge Pref and Enbridge Srs go up and down completely randomly.

Pair Corralation between Enbridge Pref and Enbridge Srs

Assuming the 90 days trading horizon Enbridge Pref 1 is expected to generate 0.74 times more return on investment than Enbridge Srs. However, Enbridge Pref 1 is 1.35 times less risky than Enbridge Srs. It trades about 0.13 of its potential returns per unit of risk. Enbridge Srs P is currently generating about 0.03 per unit of risk. If you would invest  2,302  in Enbridge Pref 1 on September 25, 2024 and sell it today you would earn a total of  63.00  from holding Enbridge Pref 1 or generate 2.74% 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 1  vs.  Enbridge Srs P

Enbridge Pref 1

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge Pref 1 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Enbridge Pref is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

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 Enbridge Pref and Enbridge Srs

The main advantage of trading using opposite Enbridge Pref and Enbridge Srs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enbridge Pref 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 Enbridge Pref 1 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.