Correlation Between BCE and First National

Can any of the company-specific risk be diversified away by investing in both BCE and First National 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 First National 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 First National Financial, you can compare the effects of market volatilities on BCE and First National 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 First National. Check out your portfolio center. Please also check ongoing floating volatility patterns of BCE and First National.

Diversification Opportunities for BCE and First National

-0.33

Correlation Coefficient

BCE  First National

Very good diversification

The 3 months correlation between BCE and First is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding BCE Inc Pref and First National Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First National Financial 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 First National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First National Financial has no effect on the direction of BCE i.e., BCE and First National go up and down completely randomly.

Pair Corralation between BCE and First National

Assuming the 90 days trading horizon BCE Inc Pref is expected to generate 0.57 times more return on investment than First National. However, BCE Inc Pref is 1.75 times less risky than First National. It trades about 0.37 of its potential returns per unit of risk. First National Financial is currently generating about -0.04 per unit of risk. If you would invest  1,625  in BCE Inc Pref on December 21, 2024 and sell it today you would earn a total of  267.00  from holding BCE Inc Pref or generate 16.43% return on investment over 90 days.

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

BCE Inc Pref  vs.  First National Financial

BCE Inc Pref

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in BCE Inc Pref are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, BCE sustained solid returns over the last few months and may actually be approaching a breakup point.

First National Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days First National Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, First National is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with BCE and First National

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

The idea behind BCE Inc Pref and First National Financial 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..