Correlation Between Transportadora and BCE

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

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

Diversification Opportunities for Transportadora and BCE

-0.34

Correlation Coefficient

Transportadora  BCE

Very good diversification

The 3 months correlation between Transportadora and BCE is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Transportadora de Gas and BCE Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCE Inc and Transportadora 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 Transportadora de Gas 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 Transportadora i.e., Transportadora and BCE go up and down completely randomly.

Pair Corralation between Transportadora and BCE

Considering the 90-day investment horizon Transportadora de Gas is expected to under-perform the BCE. In addition to that, Transportadora is 2.12 times more volatile than BCE Inc. It trades about -0.02 of its total potential returns per unit of risk. BCE Inc is currently generating about 0.06 per unit of volatility. If you would invest  2,189  in BCE Inc on December 29, 2024 and sell it today you would earn a total of  127.00  from holding BCE Inc or generate 5.8% return on investment over 90 days.

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

Transportadora de Gas  vs.  BCE Inc

Transportadora de Gas

Risk-Adjusted Performance

Very Weak

Over the last 90 days Transportadora de Gas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Transportadora is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

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 rather weak fundamental indicators, BCE may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Transportadora and BCE

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

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.