Correlation Between Stepstone and BCE

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

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

Diversification Opportunities for Stepstone and BCE

-0.85

Correlation Coefficient

Stepstone  BCE

Pay attention - limited upside

The 3 months correlation between Stepstone and BCE is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Stepstone Group and BCE Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCE Inc and Stepstone 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 Stepstone Group 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 Stepstone i.e., Stepstone and BCE go up and down completely randomly.

Pair Corralation between Stepstone and BCE

Given the investment horizon of 90 days Stepstone Group is expected to generate 1.4 times more return on investment than BCE. However, Stepstone is 1.4 times more volatile than BCE Inc. It trades about 0.13 of its potential returns per unit of risk. BCE Inc is currently generating about -0.36 per unit of risk. If you would invest  6,131  in Stepstone Group on August 31, 2024 and sell it today you would earn a total of  473.00  from holding Stepstone Group or generate 7.71% return on investment over 90 days.

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

Stepstone Group  vs.  BCE Inc

Stepstone Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Stepstone Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile technical and fundamental indicators, Stepstone reported solid returns over the last few months and may actually be approaching a breakup point.

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 sluggish performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Stepstone and BCE

The main advantage of trading using opposite Stepstone and BCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepstone 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 Stepstone Group 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.