Correlation Between BCE and Cascades

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

By analyzing existing cross correlation between BCE Inc and Cascades, you can compare the effects of market volatilities on BCE and Cascades 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 Cascades. Check out your portfolio center. Please also check ongoing floating volatility patterns of BCE and Cascades.

Diversification Opportunities for BCE and Cascades

-0.31

Correlation Coefficient

BCE  Cascades

Very good diversification

The 3 months correlation between BCE and Cascades is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding BCE Inc and Cascades in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cascades 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 are associated (or correlated) with Cascades. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cascades has no effect on the direction of BCE i.e., BCE and Cascades go up and down completely randomly.

Pair Corralation between BCE and Cascades

Assuming the 90 days trading horizon BCE Inc is expected to generate 1.01 times more return on investment than Cascades. However, BCE is 1.01 times more volatile than Cascades. It trades about 0.05 of its potential returns per unit of risk. Cascades is currently generating about -0.16 per unit of risk. If you would invest  3,145  in BCE Inc on December 29, 2024 and sell it today you would earn a total of  142.00  from holding BCE Inc or generate 4.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

BCE Inc  vs.  Cascades

BCE Inc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BCE Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, BCE is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Cascades

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cascades has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with BCE and Cascades

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

The idea behind BCE Inc and Cascades 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.