Correlation Between Pembina Pipeline and Energy Fuels

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

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

Diversification Opportunities for Pembina Pipeline and Energy Fuels

0.54

Correlation Coefficient

Pembina Pipeline  Energy Fuels

Very weak diversification

The 3 months correlation between Pembina and Energy is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Pembina Pipeline Corp and Energy Fuels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Fuels and Pembina Pipeline 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 Pembina Pipeline Corp are associated (or correlated) with Energy Fuels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Fuels has no effect on the direction of Pembina Pipeline i.e., Pembina Pipeline and Energy Fuels go up and down completely randomly.

Pair Corralation between Pembina Pipeline and Energy Fuels

Assuming the 90 days trading horizon Pembina Pipeline is expected to generate 2.1 times less return on investment than Energy Fuels. But when comparing it to its historical volatility, Pembina Pipeline Corp is 3.93 times less risky than Energy Fuels. It trades about 0.07 of its potential returns per unit of risk. Energy Fuels is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  621.00  in Energy Fuels on September 14, 2024 and sell it today you would earn a total of  256.00  from holding Energy Fuels or generate 41.22% return on investment over 90 days.

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

Pembina Pipeline Corp  vs.  Energy Fuels

Pembina Pipeline Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pembina Pipeline Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Pembina Pipeline is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Energy Fuels

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Fuels are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Energy Fuels displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pembina Pipeline and Energy Fuels

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

The idea behind Pembina Pipeline Corp and Energy Fuels 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.