Correlation Between Marstons PLC and Enbridge

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

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

Diversification Opportunities for Marstons PLC and Enbridge

0.07

Correlation Coefficient

Marstons PLC  Enbridge

Significant diversification

The 3 months correlation between Marstons and Enbridge is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Marstons PLC and Enbridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge and Marstons PLC 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 Marstons PLC 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 Marstons PLC i.e., Marstons PLC and Enbridge go up and down completely randomly.

Pair Corralation between Marstons PLC and Enbridge

Assuming the 90 days trading horizon Marstons PLC is expected to generate 2.46 times more return on investment than Enbridge. However, Marstons PLC is 2.46 times more volatile than Enbridge. It trades about 0.07 of its potential returns per unit of risk. Enbridge is currently generating about 0.17 per unit of risk. If you would invest  3,990  in Marstons PLC on September 25, 2024 and sell it today you would earn a total of  415.00  from holding Marstons PLC or generate 10.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	70.31%
Values	Daily Returns

Marstons PLC  vs.  Enbridge

Marstons PLC

Risk-Adjusted Performance

5 of 100

Modest

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

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 Marstons PLC and Enbridge

The main advantage of trading using opposite Marstons PLC and Enbridge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marstons PLC 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 Marstons PLC 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.