Correlation Between BCE and United Guardian
Can any of the company-specific risk be diversified away by investing in both BCE and United Guardian 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 United Guardian into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BCE Inc and United Guardian, you can compare the effects of market volatilities on BCE and United Guardian 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 United Guardian. Check out your portfolio center. Please also check ongoing floating volatility patterns of BCE and United Guardian.
Diversification Opportunities for BCE and United Guardian
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between BCE and United is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding BCE Inc and United Guardian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Guardian 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 United Guardian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Guardian has no effect on the direction of BCE i.e., BCE and United Guardian go up and down completely randomly.
Pair Corralation between BCE and United Guardian
Considering the 90-day investment horizon BCE Inc is expected to generate 0.61 times more return on investment than United Guardian. However, BCE Inc is 1.63 times less risky than United Guardian. It trades about -0.41 of its potential returns per unit of risk. United Guardian is currently generating about -0.42 per unit of risk. If you would invest 3,269 in BCE Inc on August 28, 2024 and sell it today you would lose (567.00) from holding BCE Inc or give up 17.34% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BCE Inc vs. United Guardian
Performance |
| Timeline |
| BCE Inc |
| United Guardian |
BCE and United Guardian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BCE and United Guardian
The main advantage of trading using opposite BCE and United Guardian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BCE position performs unexpectedly, United Guardian 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 United Guardian will offset losses from the drop in United Guardian's long position.| BCE vs. Liberty Broadband Srs | BCE vs. Ribbon Communications | BCE vs. Liberty Broadband Srs | BCE vs. Shenandoah Telecommunications Co |
| United Guardian vs. Utah Medical Products | United Guardian vs. Union Bankshares | United Guardian vs. Psychemedics | United Guardian vs. Unity Bancorp |
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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