Correlation Between Enbridge and Timbercreek Financial

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

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

Diversification Opportunities for Enbridge and Timbercreek Financial

-0.35

Correlation Coefficient

Enbridge  Timbercreek Financial

Very good diversification

The 3 months correlation between Enbridge and Timbercreek is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge and Timbercreek Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Timbercreek Financial and Enbridge 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 are associated (or correlated) with Timbercreek Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Timbercreek Financial has no effect on the direction of Enbridge i.e., Enbridge and Timbercreek Financial go up and down completely randomly.

Pair Corralation between Enbridge and Timbercreek Financial

Assuming the 90 days trading horizon Enbridge is expected to generate 0.57 times more return on investment than Timbercreek Financial. However, Enbridge is 1.76 times less risky than Timbercreek Financial. It trades about 0.26 of its potential returns per unit of risk. Timbercreek Financial Corp is currently generating about 0.02 per unit of risk. If you would invest  5,366  in Enbridge on August 31, 2024 and sell it today you would earn a total of  658.00  from holding Enbridge or generate 12.26% return on investment over 90 days.

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

Enbridge  vs.  Timbercreek Financial Corp

Enbridge

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal fundamental drivers, Enbridge may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Timbercreek Financial

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Timbercreek Financial Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Timbercreek Financial is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Enbridge and Timbercreek Financial

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

The idea behind Enbridge and Timbercreek Financial 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.