Correlation Between Enbridge and Capital Drilling

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

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

Diversification Opportunities for Enbridge and Capital Drilling

0.11

Correlation Coefficient

Enbridge  Capital Drilling

Average diversification

The 3 months correlation between Enbridge and Capital is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge and Capital Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Drilling and Enbridge 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 Enbridge are associated (or correlated) with Capital Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Drilling has no effect on the direction of Enbridge i.e., Enbridge and Capital Drilling go up and down completely randomly.

Pair Corralation between Enbridge and Capital Drilling

Assuming the 90 days trading horizon Enbridge is expected to under-perform the Capital Drilling. But the stock apears to be less risky and, when comparing its historical volatility, Enbridge is 1.57 times less risky than Capital Drilling. The stock trades about 0.0 of its potential returns per unit of risk. The Capital Drilling is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  6,940  in Capital Drilling on April 20, 2025 and sell it today you would earn a total of  2,360  from holding Capital Drilling or generate 34.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	54.84%
Values	Daily Returns

Enbridge  vs.  Capital Drilling

Enbridge

Risk-Adjusted Performance

Very Weak

Over the last 90 days Enbridge has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Enbridge is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Capital Drilling

Risk-Adjusted Performance

Solid

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

Pair Trading with Enbridge and Capital Drilling

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

The idea behind Enbridge and Capital Drilling 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.

Check out your portfolio center.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.