Correlation Between BCE and Pool

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

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

Diversification Opportunities for BCE and Pool

0.28

Correlation Coefficient

BCE  Pool

Modest diversification

The 3 months correlation between BCE and Pool is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding BCE Inc and Pool Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pool 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 Pool. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pool has no effect on the direction of BCE i.e., BCE and Pool go up and down completely randomly.

Pair Corralation between BCE and Pool

Considering the 90-day investment horizon BCE Inc is expected to under-perform the Pool. But the stock apears to be less risky and, when comparing its historical volatility, BCE Inc is 1.59 times less risky than Pool. The stock trades about -0.15 of its potential returns per unit of risk. The Pool Corporation is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  36,203  in Pool Corporation on October 2, 2024 and sell it today you would lose (2,012) from holding Pool Corporation or give up 5.56% of portfolio value over 90 days.

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

BCE Inc  vs.  Pool Corp.

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 January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pool

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pool Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with BCE and Pool

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

The idea behind BCE Inc and Pool Corporation 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.