Correlation Between VersaBank and Bce

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

Diversification Opportunities for VersaBank and Bce

-0.8
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between VersaBank and Bce is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding VersaBank 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 VersaBank 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 VersaBank 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 VersaBank i.e., VersaBank and Bce go up and down completely randomly.

Pair Corralation between VersaBank and Bce

Assuming the 90 days trading horizon VersaBank is expected to generate 2.87 times more return on investment than Bce. However, VersaBank is 2.87 times more volatile than Bce Inc Pref. It trades about 0.09 of its potential returns per unit of risk. Bce Inc Pref is currently generating about 0.02 per unit of risk. If you would invest  998.00  in VersaBank on September 14, 2024 and sell it today you would earn a total of  1,230  from holding VersaBank or generate 123.25% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

VersaBank  vs.  Bce Inc Pref

 Performance 
       Timeline  
VersaBank 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in VersaBank are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, VersaBank displayed solid returns over the last few months and may actually be approaching a breakup point.
Bce Inc Pref 

Risk-Adjusted Performance

0 of 100

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

VersaBank and Bce Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with VersaBank and Bce

The main advantage of trading using opposite VersaBank and Bce positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VersaBank 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.
The idea behind VersaBank and Bce Inc Pref 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.
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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