Correlation Between BCE and LOWES

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Can any of the company-specific risk be diversified away by investing in both BCE and LOWES 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 LOWES into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BCE Inc and LOWES INC 25, you can compare the effects of market volatilities on BCE and LOWES 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 LOWES. Check out your portfolio center. Please also check ongoing floating volatility patterns of BCE and LOWES.

Diversification Opportunities for BCE and LOWES

0.68
  Correlation Coefficient
 BCE

Poor diversification

The 3 months correlation between BCE and LOWES is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding BCE Inc and LOWES INC 25 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LOWES INC 25 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 LOWES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LOWES INC 25 has no effect on the direction of BCE i.e., BCE and LOWES go up and down completely randomly.

Pair Corralation between BCE and LOWES

Considering the 90-day investment horizon BCE Inc is expected to under-perform the LOWES. In addition to that, BCE is 1.13 times more volatile than LOWES INC 25. It trades about -0.29 of its total potential returns per unit of risk. LOWES INC 25 is currently generating about -0.17 per unit of volatility. If you would invest  9,724  in LOWES INC 25 on September 12, 2024 and sell it today you would lose (327.00) from holding LOWES INC 25 or give up 3.36% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.45%
ValuesDaily Returns

BCE Inc  vs.  LOWES INC 25

 Performance 
       Timeline  
BCE Inc 

Risk-Adjusted Performance

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Weak
 
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Very Weak
Over the last 90 days BCE Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.
LOWES INC 25 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days LOWES INC 25 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, LOWES is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

BCE and LOWES Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with BCE and LOWES

The main advantage of trading using opposite BCE and LOWES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BCE position performs unexpectedly, LOWES 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 LOWES will offset losses from the drop in LOWES's long position.
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The idea behind BCE Inc and LOWES INC 25 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.
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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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.

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