Correlation Between Champion Iron and BCE

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

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

Diversification Opportunities for Champion Iron and BCE

0.6

Correlation Coefficient

Champion Iron  BCE

Poor diversification

The 3 months correlation between Champion and BCE is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Champion Iron 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 Champion Iron 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 Champion Iron 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 Champion Iron i.e., Champion Iron and BCE go up and down completely randomly.

Pair Corralation between Champion Iron and BCE

Assuming the 90 days trading horizon Champion Iron is expected to under-perform the BCE. In addition to that, Champion Iron is 2.56 times more volatile than BCE Inc Pref. It trades about -0.01 of its total potential returns per unit of risk. BCE Inc Pref is currently generating about 0.02 per unit of volatility. If you would invest  1,455  in BCE Inc Pref on October 11, 2024 and sell it today you would earn a total of  123.00  from holding BCE Inc Pref or generate 8.45% return on investment over 90 days.

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

Champion Iron  vs.  BCE Inc Pref

Champion Iron

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Champion Iron has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

BCE Inc Pref

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BCE Inc Pref has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, BCE is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Champion Iron and BCE

The main advantage of trading using opposite Champion Iron and BCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Champion Iron 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 Champion Iron 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.