Correlation Between BCE and D2L
Can any of the company-specific risk be diversified away by investing in both BCE and D2L 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 D2L into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BCE Inc and D2L Inc, you can compare the effects of market volatilities on BCE and D2L 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 D2L. Check out your portfolio center. Please also check ongoing floating volatility patterns of BCE and D2L.
Diversification Opportunities for BCE and D2L
Pay attention - limited upside
The 3 months correlation between BCE and D2L is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding BCE Inc and D2L Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on D2L Inc 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 are associated (or correlated) with D2L. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of D2L Inc has no effect on the direction of BCE i.e., BCE and D2L go up and down completely randomly.
Pair Corralation between BCE and D2L
Assuming the 90 days trading horizon BCE Inc is expected to generate 0.66 times more return on investment than D2L. However, BCE Inc is 1.51 times less risky than D2L. It trades about 0.09 of its potential returns per unit of risk. D2L Inc is currently generating about -0.09 per unit of risk. If you would invest 3,283 in BCE Inc on October 24, 2024 and sell it today you would earn a total of 71.00 from holding BCE Inc or generate 2.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BCE Inc vs. D2L Inc
Performance |
| Timeline |
| BCE Inc |
| D2L Inc |
BCE and D2L Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BCE and D2L
The main advantage of trading using opposite BCE and D2L positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BCE position performs unexpectedly, D2L 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 D2L will offset losses from the drop in D2L's long position.The idea behind BCE Inc and D2L Inc 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 CEOs Directory module to screen CEOs from public companies around the world.
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