Correlation Between Apple and BCE

Can any of the company-specific risk be diversified away by investing in both Apple 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 Apple and BCE into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Apple Inc CDR and BCE Inc, you can compare the effects of market volatilities on Apple 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 Apple with a short position of BCE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and BCE.

Diversification Opportunities for Apple and BCE

-0.64

Correlation Coefficient

Apple  BCE

Excellent diversification

The 3 months correlation between Apple and BCE is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc CDR and BCE Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCE Inc and Apple 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 Apple Inc 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 has no effect on the direction of Apple i.e., Apple and BCE go up and down completely randomly.

Pair Corralation between Apple and BCE

Assuming the 90 days trading horizon Apple Inc CDR is expected to generate 1.23 times more return on investment than BCE. However, Apple is 1.23 times more volatile than BCE Inc. It trades about 0.08 of its potential returns per unit of risk. BCE Inc is currently generating about -0.12 per unit of risk. If you would invest  2,745  in Apple Inc CDR on October 7, 2024 and sell it today you would earn a total of  818.00  from holding Apple Inc CDR or generate 29.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Apple Inc CDR  vs.  BCE Inc

Apple Inc CDR

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc CDR are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Apple may actually be approaching a critical reversion point that can send shares even higher in February 2025.

BCE Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BCE Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Apple and BCE

The main advantage of trading using opposite Apple and BCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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 Apple Inc CDR and BCE Inc 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.

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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.