Correlation Between Pembina Pipeline and Capital Power

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

Diversification Opportunities for Pembina Pipeline and Capital Power

-0.57

Correlation Coefficient

Pembina Pipeline  Capital Power

Excellent diversification

The 3 months correlation between Pembina and Capital is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Pembina Pipeline Corp and Capital Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Power 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 Capital Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Power has no effect on the direction of Pembina Pipeline i.e., Pembina Pipeline and Capital Power go up and down completely randomly.

Pair Corralation between Pembina Pipeline and Capital Power

Assuming the 90 days trading horizon Pembina Pipeline Corp is expected to under-perform the Capital Power. But the stock apears to be less risky and, when comparing its historical volatility, Pembina Pipeline Corp is 1.15 times less risky than Capital Power. The stock trades about -0.04 of its potential returns per unit of risk. The Capital Power is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  5,010  in Capital Power on April 25, 2025 and sell it today you would earn a total of  1,309  from holding Capital Power or generate 26.13% return on investment over 90 days.

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

Pembina Pipeline Corp  vs.  Capital Power

Pembina Pipeline Corp

Risk-Adjusted Performance

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 latest stock price disarray, may contribute to short-term losses for the investors.

Capital Power

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Power are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Capital Power displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pembina Pipeline and Capital Power

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

The idea behind Pembina Pipeline Corp and Capital Power 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.