Correlation Between Gibson Energy and Enbridge Pref

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

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

Diversification Opportunities for Gibson Energy and Enbridge Pref

0.77

Correlation Coefficient

Gibson Energy  Enbridge Pref

Poor diversification

The 3 months correlation between Gibson and Enbridge is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Gibson Energy 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 Gibson Energy 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 Gibson Energy 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 Gibson Energy i.e., Gibson Energy and Enbridge Pref go up and down completely randomly.

Pair Corralation between Gibson Energy and Enbridge Pref

Assuming the 90 days trading horizon Gibson Energy is expected to generate 3.01 times more return on investment than Enbridge Pref. However, Gibson Energy is 3.01 times more volatile than Enbridge Pref 5. It trades about 0.16 of its potential returns per unit of risk. Enbridge Pref 5 is currently generating about 0.21 per unit of risk. If you would invest  2,200  in Gibson Energy on September 14, 2024 and sell it today you would earn a total of  286.00  from holding Gibson Energy or generate 13.0% return on investment over 90 days.

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

Gibson Energy  vs.  Enbridge Pref 5

Gibson Energy

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gibson Energy are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, Gibson Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Enbridge Pref 5

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge Pref 5 are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Enbridge Pref 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 Gibson Energy and Enbridge Pref

The main advantage of trading using opposite Gibson Energy and Enbridge Pref positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gibson Energy 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 Gibson Energy 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.

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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.