Correlation Between North American and BCE
Can any of the company-specific risk be diversified away by investing in both North American 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 North American and BCE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between North American Construction and BCE Inc Pref, you can compare the effects of market volatilities on North American 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 North American with a short position of BCE. Check out your portfolio center. Please also check ongoing floating volatility patterns of North American and BCE.
Diversification Opportunities for North American and BCE
-0.72 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between North and BCE is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding North American Construction 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 North American 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 North American Construction 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 North American i.e., North American and BCE go up and down completely randomly.
Pair Corralation between North American and BCE
Assuming the 90 days trading horizon North American Construction is expected to generate 2.68 times more return on investment than BCE. However, North American is 2.68 times more volatile than BCE Inc Pref. It trades about 0.03 of its potential returns per unit of risk. BCE Inc Pref is currently generating about 0.04 per unit of risk. If you would invest 2,642 in North American Construction on September 15, 2024 and sell it today you would earn a total of 323.00 from holding North American Construction or generate 12.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.63% |
| Values | Daily Returns |
North American Construction vs. BCE Inc Pref
Performance |
| Timeline |
| North American Const |
| BCE Inc Pref |
North American and BCE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with North American and BCE
The main advantage of trading using opposite North American and BCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North American 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.| North American vs. PHX Energy Services | North American vs. CES Energy Solutions | North American vs. Total Energy Services | North American vs. Pason Systems |
| BCE vs. North American Construction | BCE vs. Verizon Communications CDR | BCE vs. Altair Resources | BCE vs. Boat Rocker Media |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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