Correlation Between Big Rock and BCE

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

By analyzing existing cross correlation between Big Rock Brewery and BCE Inc Pref, you can compare the effects of market volatilities on Big Rock and BCE 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 Big Rock with a short position of BCE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big Rock and BCE.

Diversification Opportunities for Big Rock and BCE

0.3

Correlation Coefficient

Big Rock  BCE

Weak diversification

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

Pair Corralation between Big Rock and BCE

Assuming the 90 days horizon Big Rock Brewery is expected to generate 16.83 times more return on investment than BCE. However, Big Rock is 16.83 times more volatile than BCE Inc Pref. It trades about 0.09 of its potential returns per unit of risk. BCE Inc Pref is currently generating about 0.03 per unit of risk. If you would invest  7.06  in Big Rock Brewery on October 24, 2024 and sell it today you would earn a total of  93.94  from holding Big Rock Brewery or generate 1330.59% return on investment over 90 days.

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

Big Rock Brewery  vs.  BCE Inc Pref

Big Rock Brewery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Big Rock Brewery has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

BCE Inc Pref

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BCE Inc Pref are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, BCE is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Big Rock and BCE

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

The idea behind Big Rock Brewery and BCE Inc Pref 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.