Correlation Between BCE and Service Properties

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

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

Diversification Opportunities for BCE and Service Properties

0.08

Correlation Coefficient

BCE  Service Properties

Significant diversification

The 3 months correlation between BCE and Service is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding BCE Inc and Service Properties Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Service Properties Trust 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 Service Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Service Properties Trust has no effect on the direction of BCE i.e., BCE and Service Properties go up and down completely randomly.

Pair Corralation between BCE and Service Properties

Considering the 90-day investment horizon BCE is expected to generate 1.61 times less return on investment than Service Properties. But when comparing it to its historical volatility, BCE Inc is 2.04 times less risky than Service Properties. It trades about 0.06 of its potential returns per unit of risk. Service Properties Trust is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  232.00  in Service Properties Trust on December 19, 2024 and sell it today you would earn a total of  17.00  from holding Service Properties Trust or generate 7.33% 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.  Service Properties Trust

BCE Inc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BCE Inc are ranked lower than 5 (%) 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.

Service Properties Trust

Risk-Adjusted Performance

Insignificant

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

Pair Trading with BCE and Service Properties

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

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