Correlation Between Bce and Source Energy

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

Diversification Opportunities for Bce and Source Energy

-0.88

Correlation Coefficient

Bce  Source Energy

Pay attention - limited upside

The 3 months correlation between Bce and Source is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Bce Inc Pref and Source Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Source Energy Services 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 Source Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Source Energy Services has no effect on the direction of Bce i.e., Bce and Source Energy go up and down completely randomly.

Pair Corralation between Bce and Source Energy

Assuming the 90 days trading horizon Bce Inc Pref is expected to generate 0.47 times more return on investment than Source Energy. However, Bce Inc Pref is 2.12 times less risky than Source Energy. It trades about 0.16 of its potential returns per unit of risk. Source Energy Services is currently generating about -0.22 per unit of risk. If you would invest  1,591  in Bce Inc Pref on October 9, 2024 and sell it today you would earn a total of  59.00  from holding Bce Inc Pref or generate 3.71% 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.  Source Energy Services

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.

Source Energy Services

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Source Energy Services are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Source Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bce and Source Energy

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

The idea behind Bce Inc Pref and Source Energy Services 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.