Correlation Between Enbridge Pref and Enbridge

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

Diversification Opportunities for Enbridge Pref and Enbridge

0.86

Correlation Coefficient

Enbridge Pref  Enbridge

Very poor diversification

The 3 months correlation between Enbridge and Enbridge is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge Pref 1 and Enbridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge 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. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enbridge has no effect on the direction of Enbridge Pref i.e., Enbridge Pref and Enbridge go up and down completely randomly.

Pair Corralation between Enbridge Pref and Enbridge

Assuming the 90 days trading horizon Enbridge Pref 1 is expected to under-perform the Enbridge. But the preferred stock apears to be less risky and, when comparing its historical volatility, Enbridge Pref 1 is 2.71 times less risky than Enbridge. The preferred stock trades about -0.11 of its potential returns per unit of risk. The Enbridge is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  6,001  in Enbridge on September 25, 2024 and sell it today you would earn a total of  6.00  from holding Enbridge or generate 0.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Enbridge Pref 1  vs.  Enbridge

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

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental drivers, Enbridge may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Enbridge Pref and Enbridge

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

The idea behind Enbridge Pref 1 and Enbridge 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.