Correlation Between NGL Energy and Enbridge

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

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

Diversification Opportunities for NGL Energy and Enbridge

-0.52

Correlation Coefficient

NGL Energy  Enbridge

Excellent diversification

The 3 months correlation between NGL and Enbridge is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding NGL Energy Partners and Enbridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge and NGL Energy 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 NGL Energy Partners 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 has no effect on the direction of NGL Energy i.e., NGL Energy and Enbridge go up and down completely randomly.

Pair Corralation between NGL Energy and Enbridge

Assuming the 90 days trading horizon NGL Energy Partners is expected to under-perform the Enbridge. In addition to that, NGL Energy is 2.45 times more volatile than Enbridge. It trades about -0.16 of its total potential returns per unit of risk. Enbridge is currently generating about 0.5 per unit of volatility. If you would invest  4,109  in Enbridge on February 7, 2025 and sell it today you would earn a total of  524.00  from holding Enbridge or generate 12.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

NGL Energy Partners  vs.  Enbridge

NGL Energy Partners

Risk-Adjusted Performance

Very Weak

Over the last 90 days NGL Energy Partners has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Preferred Stock's essential indicators remain rather sound which may send shares a bit higher in June 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Enbridge

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Enbridge may actually be approaching a critical reversion point that can send shares even higher in June 2025.

Pair Trading with NGL Energy and Enbridge

The main advantage of trading using opposite NGL Energy and Enbridge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NGL Energy 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 NGL Energy Partners and Enbridge 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..