Correlation Between Western Sierra and BCE
Can any of the company-specific risk be diversified away by investing in both Western Sierra 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 Western Sierra and BCE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Sierra Mining and BCE Inc, you can compare the effects of market volatilities on Western Sierra 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 Western Sierra with a short position of BCE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Sierra and BCE.
Diversification Opportunities for Western Sierra and BCE
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Western and BCE is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Western Sierra Mining and BCE Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCE Inc and Western Sierra 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 Western Sierra Mining 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 has no effect on the direction of Western Sierra i.e., Western Sierra and BCE go up and down completely randomly.
Pair Corralation between Western Sierra and BCE
Given the investment horizon of 90 days Western Sierra Mining is expected to generate 93.92 times more return on investment than BCE. However, Western Sierra is 93.92 times more volatile than BCE Inc. It trades about 0.1 of its potential returns per unit of risk. BCE Inc is currently generating about -0.07 per unit of risk. If you would invest 9.47 in Western Sierra Mining on August 30, 2024 and sell it today you would lose (8.79) from holding Western Sierra Mining or give up 92.82% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Sierra Mining vs. BCE Inc
Performance |
| Timeline |
| Western Sierra Mining |
| BCE Inc |
Western Sierra and BCE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Sierra and BCE
The main advantage of trading using opposite Western Sierra and BCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Sierra 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.| Western Sierra vs. Green Cures Botanical | Western Sierra vs. Cann American Corp | Western Sierra vs. Rimrock Gold Corp | Western Sierra vs. Galexxy Holdings |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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