Correlation Between Bce and Medical Facilities

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

Diversification Opportunities for Bce and Medical Facilities

-0.83

Correlation Coefficient

Bce  Medical Facilities

Pay attention - limited upside

The 3 months correlation between Bce and Medical is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Bce Inc Pref and Medical Facilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medical Facilities 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 Medical Facilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medical Facilities has no effect on the direction of Bce i.e., Bce and Medical Facilities go up and down completely randomly.

Pair Corralation between Bce and Medical Facilities

Assuming the 90 days trading horizon Bce Inc Pref is expected to under-perform the Medical Facilities. But the preferred stock apears to be less risky and, when comparing its historical volatility, Bce Inc Pref is 2.01 times less risky than Medical Facilities. The preferred stock trades about -0.08 of its potential returns per unit of risk. The Medical Facilities is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,391  in Medical Facilities on September 24, 2024 and sell it today you would earn a total of  171.00  from holding Medical Facilities or generate 12.29% return on investment over 90 days.

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

Bce Inc Pref  vs.  Medical Facilities

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.

Medical Facilities

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Medical Facilities are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Medical Facilities may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bce and Medical Facilities

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

The idea behind Bce Inc Pref and Medical Facilities 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.