Correlation Between BCE and Daiwa Securities

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

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

Diversification Opportunities for BCE and Daiwa Securities

-0.1

Correlation Coefficient

BCE  Daiwa Securities

Good diversification

The 3 months correlation between BCE and Daiwa is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding BCE Inc and Daiwa Securities Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daiwa Securities 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 Daiwa Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daiwa Securities has no effect on the direction of BCE i.e., BCE and Daiwa Securities go up and down completely randomly.

Pair Corralation between BCE and Daiwa Securities

Considering the 90-day investment horizon BCE Inc is expected to under-perform the Daiwa Securities. But the stock apears to be less risky and, when comparing its historical volatility, BCE Inc is 2.09 times less risky than Daiwa Securities. The stock trades about -0.67 of its potential returns per unit of risk. The Daiwa Securities Group is currently generating about -0.28 of returns per unit of risk over similar time horizon. If you would invest  742.00  in Daiwa Securities Group on September 29, 2024 and sell it today you would lose (92.00) from holding Daiwa Securities Group or give up 12.4% of portfolio value over 90 days.

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

BCE Inc  vs.  Daiwa Securities Group

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

Daiwa Securities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daiwa Securities Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with BCE and Daiwa Securities

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

The idea behind BCE Inc and Daiwa Securities Group 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.

Check out your portfolio center.

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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.