Correlation Between Enbridge and TC Energy

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

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

Diversification Opportunities for Enbridge and TC Energy

0.27

Correlation Coefficient

Enbridge  TC Energy

Modest diversification

The 3 months correlation between Enbridge and TRP-PC is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge and TC Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TC Energy Corp 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 TC Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TC Energy Corp has no effect on the direction of Enbridge i.e., Enbridge and TC Energy go up and down completely randomly.

Pair Corralation between Enbridge and TC Energy

Considering the 90-day investment horizon Enbridge is expected to generate 17.51 times less return on investment than TC Energy. In addition to that, Enbridge is 1.12 times more volatile than TC Energy Corp. It trades about 0.01 of its total potential returns per unit of risk. TC Energy Corp is currently generating about 0.1 per unit of volatility. If you would invest  1,270  in TC Energy Corp on January 29, 2024 and sell it today you would earn a total of  29.00  from holding TC Energy Corp or generate 2.28% return on investment over 90 days.

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

Enbridge  vs.  TC Energy Corp

Enbridge

Risk-Adjusted Performance

2 of 100

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

TC Energy Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TC Energy Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, TC Energy may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Enbridge and TC Energy

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

The idea behind Enbridge and TC Energy Corp 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.