Correlation Between Fortis and BCE

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

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

Diversification Opportunities for Fortis and BCE

-0.6

Correlation Coefficient

Fortis  BCE

Excellent diversification

The 3 months correlation between Fortis and BCE is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Fortis Inc and BCE Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCE Inc and Fortis 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 Fortis Inc 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 Fortis i.e., Fortis and BCE go up and down completely randomly.

Pair Corralation between Fortis and BCE

Assuming the 90 days trading horizon Fortis Inc is expected to generate 0.53 times more return on investment than BCE. However, Fortis Inc is 1.87 times less risky than BCE. It trades about 0.1 of its potential returns per unit of risk. BCE Inc is currently generating about -0.22 per unit of risk. If you would invest  5,991  in Fortis Inc on September 4, 2024 and sell it today you would earn a total of  314.00  from holding Fortis Inc or generate 5.24% return on investment over 90 days.

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

Fortis Inc  vs.  BCE Inc

Fortis Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fortis Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Fortis is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

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 unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Fortis and BCE

The main advantage of trading using opposite Fortis and BCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortis 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 Fortis Inc 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.