Correlation Between BCE and BCB Bancorp

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

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

Diversification Opportunities for BCE and BCB Bancorp

0.19

Correlation Coefficient

BCE  BCB Bancorp

Average diversification

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

Pair Corralation between BCE and BCB Bancorp

Considering the 90-day investment horizon BCE Inc is expected to generate 0.83 times more return on investment than BCB Bancorp. However, BCE Inc is 1.2 times less risky than BCB Bancorp. It trades about 0.06 of its potential returns per unit of risk. BCB Bancorp is currently generating about -0.02 per unit of risk. If you would invest  2,284  in BCE Inc on October 22, 2024 and sell it today you would earn a total of  31.00  from holding BCE Inc or generate 1.36% return on investment over 90 days.

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

BCE Inc  vs.  BCB Bancorp

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 inconsistent performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

BCB Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BCB Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, BCB Bancorp is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with BCE and BCB Bancorp

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

The idea behind BCE Inc and BCB Bancorp 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.