Correlation Between BCE and Cable One
Can any of the company-specific risk be diversified away by investing in both BCE and Cable One 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 Cable One into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BCE Inc and Cable One, you can compare the effects of market volatilities on BCE and Cable One 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 Cable One. Check out your portfolio center. Please also check ongoing floating volatility patterns of BCE and Cable One.
Diversification Opportunities for BCE and Cable One
Very poor diversification
The 3 months correlation between BCE and Cable is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding BCE Inc and Cable One in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cable One 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 Cable One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cable One has no effect on the direction of BCE i.e., BCE and Cable One go up and down completely randomly.
Pair Corralation between BCE and Cable One
Assuming the 90 days horizon BCE is expected to generate 8.03 times less return on investment than Cable One. But when comparing it to its historical volatility, BCE Inc is 5.6 times less risky than Cable One. It trades about 0.21 of its potential returns per unit of risk. Cable One is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 33,689 in Cable One on August 31, 2024 and sell it today you would earn a total of 8,268 from holding Cable One or generate 24.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BCE Inc vs. Cable One
Performance |
| Timeline |
| BCE Inc |
| Cable One |
BCE and Cable One Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BCE and Cable One
The main advantage of trading using opposite BCE and Cable One positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BCE position performs unexpectedly, Cable One 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 Cable One will offset losses from the drop in Cable One's long position.The idea behind BCE Inc and Cable One 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.| Cable One vs. Liberty Broadband Srs | Cable One vs. Liberty Broadband Corp | Cable One vs. Telkom Indonesia Tbk | Cable One vs. Liberty Global PLC |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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