Correlation Between Drilling Tools and BCE

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

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

Diversification Opportunities for Drilling Tools and BCE

0.38

Correlation Coefficient

Drilling Tools  BCE

Weak diversification

The 3 months correlation between Drilling and BCE is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Drilling Tools International and BCE Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCE Inc and Drilling Tools 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 Drilling Tools International 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 has no effect on the direction of Drilling Tools i.e., Drilling Tools and BCE go up and down completely randomly.

Pair Corralation between Drilling Tools and BCE

Considering the 90-day investment horizon Drilling Tools International is expected to under-perform the BCE. In addition to that, Drilling Tools is 3.33 times more volatile than BCE Inc. It trades about -0.04 of its total potential returns per unit of risk. BCE Inc is currently generating about -0.09 per unit of volatility. If you would invest  3,942  in BCE Inc on October 13, 2024 and sell it today you would lose (1,646) from holding BCE Inc or give up 41.76% of portfolio value over 90 days.

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

Drilling Tools International  vs.  BCE Inc

Drilling Tools Inter

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Drilling Tools International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

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

Pair Trading with Drilling Tools and BCE

The main advantage of trading using opposite Drilling Tools and BCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Drilling Tools 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 Drilling Tools International and BCE Inc 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.