Correlation Between Source Rock and Enbridge

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

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

Diversification Opportunities for Source Rock and Enbridge

-0.45

Correlation Coefficient

Source Rock  Enbridge

Very good diversification

The 3 months correlation between Source and Enbridge is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Source Rock Royalties and Enbridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge and Source Rock 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 Source Rock Royalties are associated (or correlated) with Enbridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enbridge has no effect on the direction of Source Rock i.e., Source Rock and Enbridge go up and down completely randomly.

Pair Corralation between Source Rock and Enbridge

Assuming the 90 days horizon Source Rock Royalties is expected to generate 1.95 times more return on investment than Enbridge. However, Source Rock is 1.95 times more volatile than Enbridge. It trades about 0.08 of its potential returns per unit of risk. Enbridge is currently generating about 0.03 per unit of risk. If you would invest  83.00  in Source Rock Royalties on August 26, 2025 and sell it today you would earn a total of  6.00  from holding Source Rock Royalties or generate 7.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Source Rock Royalties  vs.  Enbridge

Source Rock Royalties

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Source Rock Royalties are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Source Rock may actually be approaching a critical reversion point that can send shares even higher in December 2025.

Enbridge

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge are ranked lower than 2 (%) 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 current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Source Rock and Enbridge

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

The idea behind Source Rock Royalties and Enbridge 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.