Correlation Between BCE and InPlay Oil

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Can any of the company-specific risk be diversified away by investing in both BCE and InPlay Oil 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 BCE and InPlay Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BCE Inc Pref and InPlay Oil Corp, you can compare the effects of market volatilities on BCE and InPlay Oil 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 BCE with a short position of InPlay Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of BCE and InPlay Oil.

Diversification Opportunities for BCE and InPlay Oil

-0.21
  Correlation Coefficient

Very good diversification

The 3 months correlation between BCE and InPlay is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding BCE Inc Pref and InPlay Oil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InPlay Oil Corp and BCE 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 BCE Inc Pref are associated (or correlated) with InPlay Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InPlay Oil Corp has no effect on the direction of BCE i.e., BCE and InPlay Oil go up and down completely randomly.

Pair Corralation between BCE and InPlay Oil

Assuming the 90 days trading horizon BCE Inc Pref is expected to generate 0.28 times more return on investment than InPlay Oil. However, BCE Inc Pref is 3.52 times less risky than InPlay Oil. It trades about 0.04 of its potential returns per unit of risk. InPlay Oil Corp is currently generating about -0.1 per unit of risk. If you would invest  1,745  in BCE Inc Pref on November 2, 2024 and sell it today you would earn a total of  43.00  from holding BCE Inc Pref or generate 2.46% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy99.05%
ValuesDaily Returns

BCE Inc Pref  vs.  InPlay Oil Corp

 Performance 
       Timeline  
BCE Inc Pref 

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in BCE Inc Pref are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal technical and fundamental indicators, BCE may actually be approaching a critical reversion point that can send shares even higher in March 2025.
InPlay Oil Corp 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days InPlay Oil Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

BCE and InPlay Oil Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with BCE and InPlay Oil

The main advantage of trading using opposite BCE and InPlay Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BCE position performs unexpectedly, InPlay Oil 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 InPlay Oil will offset losses from the drop in InPlay Oil's long position.
The idea behind BCE Inc Pref and InPlay Oil 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.
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 Transaction History module to view history of all your transactions and understand their impact on performance.

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