Correlation Between Bce and CVW CleanTech

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

Diversification Opportunities for Bce and CVW CleanTech

-0.43

Correlation Coefficient

Bce  CVW CleanTech

Very good diversification

The 3 months correlation between Bce and CVW is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Bce Inc Pref and CVW CleanTech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVW CleanTech 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 CVW CleanTech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVW CleanTech has no effect on the direction of Bce i.e., Bce and CVW CleanTech go up and down completely randomly.

Pair Corralation between Bce and CVW CleanTech

Assuming the 90 days trading horizon Bce Inc Pref is expected to generate 0.45 times more return on investment than CVW CleanTech. However, Bce Inc Pref is 2.24 times less risky than CVW CleanTech. It trades about 0.14 of its potential returns per unit of risk. CVW CleanTech is currently generating about -0.03 per unit of risk. If you would invest  1,588  in Bce Inc Pref on October 9, 2024 and sell it today you would earn a total of  62.00  from holding Bce Inc Pref or generate 3.9% return on investment over 90 days.

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

Bce Inc Pref  vs.  CVW CleanTech

Bce Inc Pref

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bce Inc Pref are ranked lower than 2 (%) 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.

CVW CleanTech

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CVW CleanTech are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, CVW CleanTech may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Bce and CVW CleanTech

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

The idea behind Bce Inc Pref and CVW CleanTech 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..