Correlation Between GSTechnologies and Enbridge

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

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

Diversification Opportunities for GSTechnologies and Enbridge

0.83

Correlation Coefficient

GSTechnologies  Enbridge

Very poor diversification

The 3 months correlation between GSTechnologies and Enbridge is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding GSTechnologies and Enbridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge and GSTechnologies 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 GSTechnologies 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 GSTechnologies i.e., GSTechnologies and Enbridge go up and down completely randomly.

Pair Corralation between GSTechnologies and Enbridge

Assuming the 90 days trading horizon GSTechnologies is expected to generate 6.47 times more return on investment than Enbridge. However, GSTechnologies is 6.47 times more volatile than Enbridge. It trades about 0.21 of its potential returns per unit of risk. Enbridge is currently generating about 0.17 per unit of risk. If you would invest  78.00  in GSTechnologies on September 23, 2024 and sell it today you would earn a total of  100.00  from holding GSTechnologies or generate 128.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	69.7%
Values	Daily Returns

GSTechnologies  vs.  Enbridge

GSTechnologies

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GSTechnologies are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, GSTechnologies exhibited solid returns over the last few months and may actually be approaching a breakup point.

Enbridge

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Enbridge may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with GSTechnologies and Enbridge

The main advantage of trading using opposite GSTechnologies and Enbridge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GSTechnologies 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 GSTechnologies 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.