Correlation Between Verizon Communications and BCE
Can any of the company-specific risk be diversified away by investing in both Verizon Communications 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 Verizon Communications and BCE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications CDR and BCE Inc Pref, you can compare the effects of market volatilities on Verizon Communications 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 Verizon Communications with a short position of BCE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verizon Communications and BCE.
Diversification Opportunities for Verizon Communications and BCE
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Verizon and BCE is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications CDR 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 Verizon Communications 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 Verizon Communications CDR 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 Verizon Communications i.e., Verizon Communications and BCE go up and down completely randomly.
Pair Corralation between Verizon Communications and BCE
Assuming the 90 days trading horizon Verizon Communications CDR is expected to generate 1.6 times more return on investment than BCE. However, Verizon Communications is 1.6 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 0.02 per unit of risk. If you would invest 1,524 in Verizon Communications CDR on September 14, 2024 and sell it today you would earn a total of 316.00 from holding Verizon Communications CDR or generate 20.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Verizon Communications CDR vs. BCE Inc Pref
Performance |
| Timeline |
| Verizon Communications |
| BCE Inc Pref |
Verizon Communications and BCE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Verizon Communications and BCE
The main advantage of trading using opposite Verizon Communications and BCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications 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.| Verizon Communications vs. Bank of Nova | Verizon Communications vs. Hampton Financial Corp | Verizon Communications vs. Postmedia Network Canada | Verizon Communications vs. Element Fleet Management |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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