Correlation Between Plains All and TC Energy

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

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

Diversification Opportunities for Plains All and TC Energy

0.06

Correlation Coefficient

Plains All  TC Energy

Significant diversification

The 3 months correlation between Plains and TRP is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Plains All American and TC Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TC Energy Corp and Plains All 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 Plains All American are associated (or correlated) with TC Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TC Energy Corp has no effect on the direction of Plains All i.e., Plains All and TC Energy go up and down completely randomly.

Pair Corralation between Plains All and TC Energy

Considering the 90-day investment horizon Plains All is expected to generate 2.09 times less return on investment than TC Energy. In addition to that, Plains All is 1.05 times more volatile than TC Energy Corp. It trades about 0.1 of its total potential returns per unit of risk. TC Energy Corp is currently generating about 0.22 per unit of volatility. If you would invest  4,143  in TC Energy Corp on September 2, 2024 and sell it today you would earn a total of  750.00  from holding TC Energy Corp or generate 18.1% return on investment over 90 days.

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

Plains All American  vs.  TC Energy Corp

Plains All American

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Plains All American are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Plains All may actually be approaching a critical reversion point that can send shares even higher in January 2025.

TC Energy Corp

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TC Energy Corp are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, TC Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Plains All and TC Energy

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

The idea behind Plains All American and TC Energy 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.