Correlation Between Economic Investment and Enbridge Pref

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Can any of the company-specific risk be diversified away by investing in both Economic Investment and Enbridge Pref 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 Economic Investment and Enbridge Pref into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Economic Investment Trust and Enbridge Pref 5, you can compare the effects of market volatilities on Economic Investment and Enbridge Pref 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 Economic Investment with a short position of Enbridge Pref. Check out your portfolio center. Please also check ongoing floating volatility patterns of Economic Investment and Enbridge Pref.

Diversification Opportunities for Economic Investment and Enbridge Pref

0.68
  Correlation Coefficient

Poor diversification

The 3 months correlation between Economic and Enbridge is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Economic Investment Trust and Enbridge Pref 5 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge Pref 5 and Economic Investment 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 Economic Investment Trust are associated (or correlated) with Enbridge Pref. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enbridge Pref 5 has no effect on the direction of Economic Investment i.e., Economic Investment and Enbridge Pref go up and down completely randomly.

Pair Corralation between Economic Investment and Enbridge Pref

Assuming the 90 days trading horizon Economic Investment is expected to generate 1.52 times less return on investment than Enbridge Pref. In addition to that, Economic Investment is 1.83 times more volatile than Enbridge Pref 5. It trades about 0.09 of its total potential returns per unit of risk. Enbridge Pref 5 is currently generating about 0.25 per unit of volatility. If you would invest  2,242  in Enbridge Pref 5 on September 11, 2024 and sell it today you would earn a total of  157.00  from holding Enbridge Pref 5 or generate 7.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy98.41%
ValuesDaily Returns

Economic Investment Trust  vs.  Enbridge Pref 5

 Performance 
       Timeline  
Economic Investment Trust 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Economic Investment Trust are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Economic Investment is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.
Enbridge Pref 5 

Risk-Adjusted Performance

19 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge Pref 5 are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Enbridge Pref may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Economic Investment and Enbridge Pref Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Economic Investment and Enbridge Pref

The main advantage of trading using opposite Economic Investment and Enbridge Pref positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Economic Investment position performs unexpectedly, Enbridge Pref 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 Pref will offset losses from the drop in Enbridge Pref's long position.
The idea behind Economic Investment Trust and Enbridge Pref 5 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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