Correlation Between Laurentian Bank and BCE
Can any of the company-specific risk be diversified away by investing in both Laurentian Bank and BCE 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 Laurentian Bank and BCE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Laurentian Bank and BCE Inc Pref, you can compare the effects of market volatilities on Laurentian Bank and BCE 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 Laurentian Bank with a short position of BCE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Laurentian Bank and BCE.
Diversification Opportunities for Laurentian Bank and BCE
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Laurentian and BCE is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Laurentian Bank and BCE Inc Pref in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCE Inc Pref and Laurentian Bank 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 Laurentian Bank are associated (or correlated) with BCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BCE Inc Pref has no effect on the direction of Laurentian Bank i.e., Laurentian Bank and BCE go up and down completely randomly.
Pair Corralation between Laurentian Bank and BCE
Assuming the 90 days horizon Laurentian Bank is expected to under-perform the BCE. In addition to that, Laurentian Bank is 1.4 times more volatile than BCE Inc Pref. It trades about -0.06 of its total potential returns per unit of risk. BCE Inc Pref is currently generating about 0.36 per unit of volatility. If you would invest 1,652 in BCE Inc Pref on November 3, 2024 and sell it today you would earn a total of 95.00 from holding BCE Inc Pref or generate 5.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Laurentian Bank vs. BCE Inc Pref
Performance |
| Timeline |
| Laurentian Bank |
| BCE Inc Pref |
Laurentian Bank and BCE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Laurentian Bank and BCE
The main advantage of trading using opposite Laurentian Bank and BCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Laurentian Bank position performs unexpectedly, BCE 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 BCE will offset losses from the drop in BCE's long position.| Laurentian Bank vs. Canadian Western Bank | Laurentian Bank vs. National Bank of | Laurentian Bank vs. Canadian Imperial Bank | Laurentian Bank vs. Great West Lifeco |
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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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