Correlation Between American Nortel and BCE
Can any of the company-specific risk be diversified away by investing in both American Nortel and BCE 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 American Nortel and BCE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Nortel Communications and BCE Inc, you can compare the effects of market volatilities on American Nortel and BCE 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 American Nortel with a short position of BCE. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Nortel and BCE.
Diversification Opportunities for American Nortel and BCE
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between American and BCE is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding American Nortel Communications and BCE Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCE Inc and American Nortel 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 American Nortel Communications are associated (or correlated) with BCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BCE Inc has no effect on the direction of American Nortel i.e., American Nortel and BCE go up and down completely randomly.
Pair Corralation between American Nortel and BCE
Given the investment horizon of 90 days American Nortel is expected to generate 1.72 times less return on investment than BCE. In addition to that, American Nortel is 7.75 times more volatile than BCE Inc. It trades about 0.02 of its total potential returns per unit of risk. BCE Inc is currently generating about 0.21 per unit of volatility. If you would invest 1,069 in BCE Inc on August 25, 2024 and sell it today you would earn a total of 31.00 from holding BCE Inc or generate 2.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Nortel Communications vs. BCE Inc
Performance |
| Timeline |
| American Nortel Comm |
| BCE Inc |
American Nortel and BCE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Nortel and BCE
The main advantage of trading using opposite American Nortel and BCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Nortel position performs unexpectedly, BCE 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 BCE will offset losses from the drop in BCE's long position.| American Nortel vs. Vodafone Group PLC | American Nortel vs. KDDI Corp | American Nortel vs. Amrica Mvil, SAB | American Nortel vs. Singapore Telecommunications Limited |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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