Correlation Between BCE and Blackline Safety

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

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

Diversification Opportunities for BCE and Blackline Safety

0.44

Correlation Coefficient

BCE  Blackline Safety

Very weak diversification

The 3 months correlation between BCE and Blackline is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding BCE Inc and Blackline Safety Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackline Safety Corp 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 Blackline Safety. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackline Safety Corp has no effect on the direction of BCE i.e., BCE and Blackline Safety go up and down completely randomly.

Pair Corralation between BCE and Blackline Safety

Assuming the 90 days horizon BCE is expected to generate 10.38 times less return on investment than Blackline Safety. But when comparing it to its historical volatility, BCE Inc is 4.38 times less risky than Blackline Safety. It trades about 0.04 of its potential returns per unit of risk. Blackline Safety Corp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  280.00  in Blackline Safety Corp on September 2, 2024 and sell it today you would earn a total of  178.00  from holding Blackline Safety Corp or generate 63.57% return on investment over 90 days.

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

BCE Inc  vs.  Blackline Safety Corp

BCE Inc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BCE Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, BCE is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Blackline Safety Corp

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Blackline Safety Corp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Blackline Safety reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BCE and Blackline Safety

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

The idea behind BCE Inc and Blackline Safety Corp 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.