Correlation Between Natural Alternatives and BCE

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

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

Diversification Opportunities for Natural Alternatives and BCE

0.68

Correlation Coefficient

Natural Alternatives  BCE

Poor diversification

The 3 months correlation between Natural and BCE is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Natural Alternatives Internati and BCE Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCE Inc and Natural Alternatives 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 Natural Alternatives 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 Natural Alternatives i.e., Natural Alternatives and BCE go up and down completely randomly.

Pair Corralation between Natural Alternatives and BCE

Given the investment horizon of 90 days Natural Alternatives International is expected to under-perform the BCE. In addition to that, Natural Alternatives is 2.73 times more volatile than BCE Inc. It trades about -0.13 of its total potential returns per unit of risk. BCE Inc is currently generating about -0.26 per unit of volatility. If you would invest  3,520  in BCE Inc on September 5, 2024 and sell it today you would lose (789.00) from holding BCE Inc or give up 22.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Natural Alternatives Internati  vs.  BCE Inc

Natural Alternatives

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Natural Alternatives International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing 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 January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Natural Alternatives and BCE

The main advantage of trading using opposite Natural Alternatives and BCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Natural Alternatives 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 Natural Alternatives 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.