Correlation Between Amazon CDR and BCE

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

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

Diversification Opportunities for Amazon CDR and BCE

-0.64

Correlation Coefficient

Amazon CDR  BCE

Excellent diversification

The 3 months correlation between Amazon and BCE is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Amazon 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 Amazon CDR 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 Amazon 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 Amazon CDR i.e., Amazon CDR and BCE go up and down completely randomly.

Pair Corralation between Amazon CDR and BCE

Assuming the 90 days trading horizon Amazon CDR is expected to generate 1.18 times less return on investment than BCE. In addition to that, Amazon CDR is 2.55 times more volatile than BCE Inc Pref. It trades about 0.08 of its total potential returns per unit of risk. BCE Inc Pref is currently generating about 0.24 per unit of volatility. If you would invest  1,593  in BCE Inc Pref on October 4, 2024 and sell it today you would earn a total of  54.00  from holding BCE Inc Pref or generate 3.39% return on investment over 90 days.

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

Amazon CDR  vs.  BCE Inc Pref

Amazon CDR

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon CDR are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Amazon CDR exhibited solid returns over the last few months and may actually be approaching a breakup point.

BCE Inc Pref

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BCE Inc Pref are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Amazon CDR and BCE

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

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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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.