Correlation Between Soho House and BCE

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

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

Diversification Opportunities for Soho House and BCE

-0.65

Correlation Coefficient

Soho House  BCE

Excellent diversification

The 3 months correlation between Soho and BCE is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Soho House Co and BCE Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCE Inc and Soho House 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 Soho House Co 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 Soho House i.e., Soho House and BCE go up and down completely randomly.

Pair Corralation between Soho House and BCE

Given the investment horizon of 90 days Soho House Co is expected to under-perform the BCE. But the stock apears to be less risky and, when comparing its historical volatility, Soho House Co is 1.19 times less risky than BCE. The stock trades about -0.49 of its potential returns per unit of risk. The BCE Inc is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  2,403  in BCE Inc on December 5, 2024 and sell it today you would lose (42.00) from holding BCE Inc or give up 1.75% of portfolio value over 90 days.

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

Soho House Co  vs.  BCE Inc

Soho House

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Soho House Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Soho House displayed solid returns over the last few months and may actually be approaching a breakup point.

BCE Inc

Risk-Adjusted Performance

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 latest inconsistent performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Soho House and BCE

The main advantage of trading using opposite Soho House and BCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Soho House 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 Soho House Co 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.