Correlation Between Pembina Pipeline and Forum Energy

Can any of the company-specific risk be diversified away by investing in both Pembina Pipeline and Forum 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 Pembina Pipeline and Forum Energy 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 Forum Energy Metals, you can compare the effects of market volatilities on Pembina Pipeline and Forum 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 Pembina Pipeline with a short position of Forum Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pembina Pipeline and Forum Energy.

Diversification Opportunities for Pembina Pipeline and Forum Energy

0.7

Correlation Coefficient

Pembina Pipeline  Forum Energy

Poor diversification

The 3 months correlation between Pembina and Forum is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Pembina Pipeline Corp and Forum Energy Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forum Energy Metals 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 Forum Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forum Energy Metals has no effect on the direction of Pembina Pipeline i.e., Pembina Pipeline and Forum Energy go up and down completely randomly.

Pair Corralation between Pembina Pipeline and Forum Energy

Assuming the 90 days trading horizon Pembina Pipeline Corp is expected to generate 0.14 times more return on investment than Forum Energy. However, Pembina Pipeline Corp is 7.15 times less risky than Forum Energy. It trades about 0.12 of its potential returns per unit of risk. Forum Energy Metals is currently generating about 0.01 per unit of risk. If you would invest  5,407  in Pembina Pipeline Corp on August 31, 2024 and sell it today you would earn a total of  364.00  from holding Pembina Pipeline Corp or generate 6.73% return on investment over 90 days.

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

Pembina Pipeline Corp  vs.  Forum Energy Metals

Pembina Pipeline Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pembina Pipeline Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal essential indicators, Pembina Pipeline may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Forum Energy Metals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Forum Energy Metals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Forum Energy 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 Pembina Pipeline and Forum Energy

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

The idea behind Pembina Pipeline Corp and Forum Energy Metals 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..