Correlation Between Enbridge and Compagnie Financire

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

By analyzing existing cross correlation between Enbridge and Compagnie Financire Richemont, you can compare the effects of market volatilities on Enbridge and Compagnie Financire 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 Compagnie Financire. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enbridge and Compagnie Financire.

Diversification Opportunities for Enbridge and Compagnie Financire

-0.41

Correlation Coefficient

Enbridge  Compagnie Financire

Very good diversification

The 3 months correlation between Enbridge and Compagnie is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge and Compagnie Financire Richemont in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie Financire 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 Compagnie Financire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compagnie Financire has no effect on the direction of Enbridge i.e., Enbridge and Compagnie Financire go up and down completely randomly.

Pair Corralation between Enbridge and Compagnie Financire

Considering the 90-day investment horizon Enbridge is expected to generate 0.45 times more return on investment than Compagnie Financire. However, Enbridge is 2.25 times less risky than Compagnie Financire. It trades about 0.07 of its potential returns per unit of risk. Compagnie Financire Richemont is currently generating about 0.02 per unit of risk. If you would invest  3,262  in Enbridge on February 8, 2025 and sell it today you would earn a total of  1,316  from holding Enbridge or generate 40.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	92.49%
Values	Daily Returns

Enbridge  vs.  Compagnie Financire Richemont

Enbridge

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Enbridge is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Compagnie Financire

Risk-Adjusted Performance

Very Weak

Over the last 90 days Compagnie Financire Richemont has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Enbridge and Compagnie Financire

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

The idea behind Enbridge and Compagnie Financire Richemont 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.