Correlation Between Bce and Leons Furniture

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

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

Diversification Opportunities for Bce and Leons Furniture

0.86

Correlation Coefficient

Bce  Leons Furniture

Very poor diversification

The 3 months correlation between Bce and Leons is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Bce Inc Pref and Leons Furniture Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leons Furniture and Bce 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 Bce Inc Pref are associated (or correlated) with Leons Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leons Furniture has no effect on the direction of Bce i.e., Bce and Leons Furniture go up and down completely randomly.

Pair Corralation between Bce and Leons Furniture

Assuming the 90 days trading horizon Bce Inc Pref is expected to under-perform the Leons Furniture. But the preferred stock apears to be less risky and, when comparing its historical volatility, Bce Inc Pref is 3.18 times less risky than Leons Furniture. The preferred stock trades about -0.05 of its potential returns per unit of risk. The Leons Furniture Limited is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,814  in Leons Furniture Limited on September 25, 2024 and sell it today you would earn a total of  783.00  from holding Leons Furniture Limited or generate 43.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.6%
Values	Daily Returns

Bce Inc Pref  vs.  Leons Furniture Limited

Bce Inc Pref

Risk-Adjusted Performance

0 of 100

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.

Leons Furniture

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Leons Furniture Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Bce and Leons Furniture

The main advantage of trading using opposite Bce and Leons Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bce position performs unexpectedly, Leons Furniture 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 Leons Furniture will offset losses from the drop in Leons Furniture's long position.

The idea behind Bce Inc Pref and Leons Furniture Limited 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.