Correlation Between Great West and BCE

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

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

Diversification Opportunities for Great West and BCE

0.18

Correlation Coefficient

Great West  BCE

Average diversification

The 3 months correlation between Great and BCE is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Great West Lifeco and BCE Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCE Inc and Great West 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 Great West Lifeco 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 Great West i.e., Great West and BCE go up and down completely randomly.

Pair Corralation between Great West and BCE

Assuming the 90 days trading horizon Great West Lifeco is expected to generate 0.88 times more return on investment than BCE. However, Great West Lifeco is 1.14 times less risky than BCE. It trades about 0.17 of its potential returns per unit of risk. BCE Inc is currently generating about 0.06 per unit of risk. If you would invest  4,696  in Great West Lifeco on December 28, 2024 and sell it today you would earn a total of  830.00  from holding Great West Lifeco or generate 17.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Great West Lifeco  vs.  BCE Inc

Great West Lifeco

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Great West Lifeco are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Great West displayed solid returns over the last few months and may actually be approaching a breakup point.

BCE Inc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BCE Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, BCE is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Great West and BCE

The main advantage of trading using opposite Great West and BCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great West 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 Great West Lifeco 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..