Correlation Between Targa Resources and Enbridge

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

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

Diversification Opportunities for Targa Resources and Enbridge

-0.33

Correlation Coefficient

Targa Resources  Enbridge

Very good diversification

The 3 months correlation between Targa and Enbridge is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Targa Resources Corp and Enbridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge and Targa Resources 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 Targa Resources Corp 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 Targa Resources i.e., Targa Resources and Enbridge go up and down completely randomly.

Pair Corralation between Targa Resources and Enbridge

Assuming the 90 days horizon Targa Resources Corp is expected to under-perform the Enbridge. In addition to that, Targa Resources is 1.84 times more volatile than Enbridge. It trades about -0.04 of its total potential returns per unit of risk. Enbridge is currently generating about -0.01 per unit of volatility. If you would invest  3,897  in Enbridge on April 22, 2025 and sell it today you would lose (35.00) from holding Enbridge or give up 0.9% of portfolio value over 90 days.

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

Targa Resources Corp  vs.  Enbridge

Targa Resources Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Targa Resources Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Targa Resources is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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. Despite nearly stable basic indicators, Enbridge is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Targa Resources and Enbridge

The main advantage of trading using opposite Targa Resources and Enbridge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Targa Resources 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 Targa Resources Corp 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 Transaction History module to view history of all your transactions and understand their impact on performance.