Correlation Between E L and Enbridge

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

By analyzing existing cross correlation between E L Financial 3 and Enbridge Pref 9, you can compare the effects of market volatilities on E L 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 E L with a short position of Enbridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of E L and Enbridge.

Diversification Opportunities for E L and Enbridge

0.82

Correlation Coefficient

E L  Enbridge

Very poor diversification

The 3 months correlation between ELF-PH and Enbridge is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding E L Financial 3 and Enbridge Pref 9 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge Pref 9 and E L 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 E L Financial 3 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 Pref 9 has no effect on the direction of E L i.e., E L and Enbridge go up and down completely randomly.

Pair Corralation between E L and Enbridge

Assuming the 90 days trading horizon E L is expected to generate 1.48 times less return on investment than Enbridge. But when comparing it to its historical volatility, E L Financial 3 is 1.41 times less risky than Enbridge. It trades about 0.19 of its potential returns per unit of risk. Enbridge Pref 9 is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  2,087  in Enbridge Pref 9 on June 29, 2025 and sell it today you would earn a total of  113.00  from holding Enbridge Pref 9 or generate 5.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

E L Financial 3  vs.  Enbridge Pref 9

E L Financial

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in E L Financial 3 are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, E L is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Enbridge Pref 9

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge Pref 9 are ranked lower than 15 (%) 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 recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with E L and Enbridge

The main advantage of trading using opposite E L and Enbridge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if E L 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 E L Financial 3 and Enbridge Pref 9 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.