Correlation Between BCE and Firm Capital
Can any of the company-specific risk be diversified away by investing in both BCE and Firm Capital 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 Firm Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BCE Inc and Firm Capital Mortgage, you can compare the effects of market volatilities on BCE and Firm Capital 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 Firm Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of BCE and Firm Capital.
Diversification Opportunities for BCE and Firm Capital
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between BCE and Firm is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding BCE Inc and Firm Capital Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Firm Capital Mortgage 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 Firm Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Firm Capital Mortgage has no effect on the direction of BCE i.e., BCE and Firm Capital go up and down completely randomly.
Pair Corralation between BCE and Firm Capital
Assuming the 90 days trading horizon BCE Inc is expected to under-perform the Firm Capital. In addition to that, BCE is 1.27 times more volatile than Firm Capital Mortgage. It trades about -0.11 of its total potential returns per unit of risk. Firm Capital Mortgage is currently generating about 0.12 per unit of volatility. If you would invest 1,024 in Firm Capital Mortgage on September 3, 2024 and sell it today you would earn a total of 157.00 from holding Firm Capital Mortgage or generate 15.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BCE Inc vs. Firm Capital Mortgage
Performance |
| Timeline |
| BCE Inc |
| Firm Capital Mortgage |
BCE and Firm Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BCE and Firm Capital
The main advantage of trading using opposite BCE and Firm Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BCE position performs unexpectedly, Firm Capital 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 Firm Capital will offset losses from the drop in Firm Capital's long position.The idea behind BCE Inc and Firm Capital Mortgage 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.| Firm Capital vs. Colliers International Group | Firm Capital vs. Altus Group Limited | Firm Capital vs. Harvest Global REIT | Firm Capital vs. International Zeolite Corp |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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