Correlation Between BCE and Drilling Tools

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

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

Diversification Opportunities for BCE and Drilling Tools

-0.3

Correlation Coefficient

BCE  Drilling Tools

Very good diversification

The 3 months correlation between BCE and Drilling is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding BCE Inc and Drilling Tools International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Drilling Tools Inter 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 Drilling Tools. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Drilling Tools Inter has no effect on the direction of BCE i.e., BCE and Drilling Tools go up and down completely randomly.

Pair Corralation between BCE and Drilling Tools

Considering the 90-day investment horizon BCE Inc is expected to generate 0.54 times more return on investment than Drilling Tools. However, BCE Inc is 1.87 times less risky than Drilling Tools. It trades about 0.06 of its potential returns per unit of risk. Drilling Tools International is currently generating about -0.04 per unit of risk. If you would invest  2,189  in BCE Inc on December 28, 2024 and sell it today you would earn a total of  127.00  from holding BCE Inc or generate 5.8% return on investment over 90 days.

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

BCE Inc  vs.  Drilling Tools International

BCE Inc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BCE Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent fundamental indicators, BCE may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Drilling Tools Inter

Risk-Adjusted Performance

Very Weak

Over the last 90 days Drilling Tools International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with BCE and Drilling Tools

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

The idea behind BCE Inc and Drilling Tools International 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.