Correlation Between HE Equipment and BCE

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Can any of the company-specific risk be diversified away by investing in both HE Equipment 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 HE Equipment and BCE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HE Equipment Services and BCE Inc, you can compare the effects of market volatilities on HE Equipment 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 HE Equipment with a short position of BCE. Check out your portfolio center. Please also check ongoing floating volatility patterns of HE Equipment and BCE.

Diversification Opportunities for HE Equipment and BCE

-0.86
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between HEES and BCE is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding HE Equipment Services and BCE Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCE Inc and HE Equipment 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 HE Equipment Services 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 HE Equipment i.e., HE Equipment and BCE go up and down completely randomly.

Pair Corralation between HE Equipment and BCE

Given the investment horizon of 90 days HE Equipment Services is expected to generate 2.36 times more return on investment than BCE. However, HE Equipment is 2.36 times more volatile than BCE Inc. It trades about 0.03 of its potential returns per unit of risk. BCE Inc is currently generating about -0.08 per unit of risk. If you would invest  4,297  in HE Equipment Services on September 18, 2024 and sell it today you would earn a total of  1,060  from holding HE Equipment Services or generate 24.67% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

HE Equipment Services  vs.  BCE Inc

 Performance 
       Timeline  
HE Equipment Services 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in HE Equipment Services are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, HE Equipment unveiled solid returns over the last few months and may actually be approaching a breakup point.
BCE Inc 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 uncertain performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

HE Equipment and BCE Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with HE Equipment and BCE

The main advantage of trading using opposite HE Equipment and BCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HE Equipment 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 HE Equipment Services 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.

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