Correlation Between Enbridge and Canadian National
Can any of the company-specific risk be diversified away by investing in both Enbridge and Canadian National 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 Canadian National into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Enbridge and Canadian National Railway, you can compare the effects of market volatilities on Enbridge and Canadian National 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 Canadian National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enbridge and Canadian National.
Diversification Opportunities for Enbridge and Canadian National
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between Enbridge and Canadian is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge and Canadian National Railway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian National Railway 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 Canadian National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian National Railway has no effect on the direction of Enbridge i.e., Enbridge and Canadian National go up and down completely randomly.
Pair Corralation between Enbridge and Canadian National
Assuming the 90 days trading horizon Enbridge is expected to under-perform the Canadian National. But the stock apears to be less risky and, when comparing its historical volatility, Enbridge is 1.28 times less risky than Canadian National. The stock trades about -0.24 of its potential returns per unit of risk. The Canadian National Railway is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 17,605 in Canadian National Railway on January 17, 2024 and sell it today you would earn a total of 138.00 from holding Canadian National Railway or generate 0.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Enbridge vs. Canadian National Railway
Performance |
| Timeline |
| Enbridge |
| Canadian National Railway |
Enbridge and Canadian National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Enbridge and Canadian National
The main advantage of trading using opposite Enbridge and Canadian National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enbridge position performs unexpectedly, Canadian National 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 Canadian National will offset losses from the drop in Canadian National's long position.| Enbridge vs. Enbridge Pref 5 | Enbridge vs. Enbridge Pref 11 | Enbridge vs. Enbridge Pref L | Enbridge vs. E Split Corp |
| Canadian National vs. WSP Global | Canadian National vs. Open Text Corp | Canadian National vs. Cargojet | Canadian National vs. BRP Inc |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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