Correlation Between Enbridge and NuStar Energy
Can any of the company-specific risk be diversified away by investing in both Enbridge and NuStar Energy 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 NuStar Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Enbridge and NuStar Energy LP, you can compare the effects of market volatilities on Enbridge and NuStar Energy 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 NuStar Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enbridge and NuStar Energy.
Diversification Opportunities for Enbridge and NuStar Energy
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Enbridge and NuStar is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge and NuStar Energy LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NuStar Energy LP 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 NuStar Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NuStar Energy LP has no effect on the direction of Enbridge i.e., Enbridge and NuStar Energy go up and down completely randomly.
Pair Corralation between Enbridge and NuStar Energy
Considering the 90-day investment horizon Enbridge is expected to generate 0.65 times more return on investment than NuStar Energy. However, Enbridge is 1.54 times less risky than NuStar Energy. It trades about -0.09 of its potential returns per unit of risk. NuStar Energy LP is currently generating about -0.18 per unit of risk. If you would invest 3,579 in Enbridge on January 21, 2024 and sell it today you would lose (93.00) from holding Enbridge or give up 2.6% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Enbridge vs. NuStar Energy LP
Performance |
| Timeline |
| Enbridge |
| NuStar Energy LP |
Enbridge and NuStar Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Enbridge and NuStar Energy
The main advantage of trading using opposite Enbridge and NuStar Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enbridge position performs unexpectedly, NuStar Energy 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 NuStar Energy will offset losses from the drop in NuStar Energy's long position.| Enbridge vs. Energy Transfer LP | Enbridge vs. Kinder Morgan | Enbridge vs. MPLX LP | Enbridge vs. Pembina Pipeline Corp |
| NuStar Energy vs. MPLX LP | NuStar Energy vs. Western Midstream Partners | NuStar Energy vs. Plains All American | NuStar Energy vs. Genesis Energy LP |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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