Correlation Between Enbridge and Tsakos Energy

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

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

Diversification Opportunities for Enbridge and Tsakos Energy

-0.4

Correlation Coefficient

Enbridge  Tsakos Energy

Very good diversification

The 3 months correlation between Enbridge and Tsakos is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge and Tsakos Energy Navigation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tsakos Energy Navigation 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 Tsakos Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tsakos Energy Navigation has no effect on the direction of Enbridge i.e., Enbridge and Tsakos Energy go up and down completely randomly.

Pair Corralation between Enbridge and Tsakos Energy

Considering the 90-day investment horizon Enbridge is expected to generate 1.7 times less return on investment than Tsakos Energy. But when comparing it to its historical volatility, Enbridge is 3.04 times less risky than Tsakos Energy. It trades about 0.14 of its potential returns per unit of risk. Tsakos Energy Navigation is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,459  in Tsakos Energy Navigation on July 13, 2024 and sell it today you would earn a total of  78.00  from holding Tsakos Energy Navigation or generate 3.17% return on investment over 90 days.

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

Enbridge  vs.  Tsakos Energy Navigation

Enbridge

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Enbridge sustained solid returns over the last few months and may actually be approaching a breakup point.

Tsakos Energy Navigation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tsakos Energy Navigation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Tsakos Energy is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Enbridge and Tsakos Energy

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

The idea behind Enbridge and Tsakos Energy Navigation 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.

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.