Correlation Between BCE and Telus Corp
Can any of the company-specific risk be diversified away by investing in both BCE and Telus Corp 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 Telus Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BCE Inc and Telus Corp, you can compare the effects of market volatilities on BCE and Telus Corp 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 Telus Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of BCE and Telus Corp.
Diversification Opportunities for BCE and Telus Corp
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BCE and Telus is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding BCE Inc and Telus Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telus 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 are associated (or correlated) with Telus Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telus Corp has no effect on the direction of BCE i.e., BCE and Telus Corp go up and down completely randomly.
Pair Corralation between BCE and Telus Corp
Assuming the 90 days trading horizon BCE Inc is expected to under-perform the Telus Corp. But the stock apears to be less risky and, when comparing its historical volatility, BCE Inc is 1.02 times less risky than Telus Corp. The stock trades about -0.08 of its potential returns per unit of risk. The Telus Corp is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 2,575 in Telus Corp on August 24, 2024 and sell it today you would lose (437.00) from holding Telus Corp or give up 16.97% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BCE Inc vs. Telus Corp
Performance |
| Timeline |
| BCE Inc |
| Telus Corp |
BCE and Telus Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BCE and Telus Corp
The main advantage of trading using opposite BCE and Telus Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BCE position performs unexpectedly, Telus Corp 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 Telus Corp will offset losses from the drop in Telus Corp's long position.The idea behind BCE Inc and Telus 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.| Telus Corp vs. BCE Inc | Telus Corp vs. Fortis Inc | Telus Corp vs. Enbridge | Telus Corp vs. Toronto Dominion Bank |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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