Correlation Between BCE and Caribbean Utilities

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

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

Diversification Opportunities for BCE and Caribbean Utilities

0.19

Correlation Coefficient

BCE  Caribbean Utilities

Average diversification

The 3 months correlation between BCE and Caribbean is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding BCE Inc and Caribbean Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caribbean Utilities 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 Caribbean Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caribbean Utilities has no effect on the direction of BCE i.e., BCE and Caribbean Utilities go up and down completely randomly.

Pair Corralation between BCE and Caribbean Utilities

Assuming the 90 days trading horizon BCE Inc is expected to under-perform the Caribbean Utilities. But the stock apears to be less risky and, when comparing its historical volatility, BCE Inc is 1.56 times less risky than Caribbean Utilities. The stock trades about -0.11 of its potential returns per unit of risk. The Caribbean Utilities is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,116  in Caribbean Utilities on September 30, 2024 and sell it today you would earn a total of  282.00  from holding Caribbean Utilities or generate 25.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	93.26%
Values	Daily Returns

BCE Inc  vs.  Caribbean Utilities

BCE Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BCE Inc 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 technical and fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Caribbean Utilities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Caribbean Utilities has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Caribbean Utilities 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 Caribbean Utilities

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

The idea behind BCE Inc and Caribbean Utilities 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..