Correlation Between Therma Bright and Bce

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

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

Diversification Opportunities for Therma Bright and Bce

0.6

Correlation Coefficient

Therma Bright  Bce

Poor diversification

The 3 months correlation between Therma and Bce is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Therma Bright and Bce Inc Pref in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bce Inc Pref and Therma Bright 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 Therma Bright 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 Pref has no effect on the direction of Therma Bright i.e., Therma Bright and Bce go up and down completely randomly.

Pair Corralation between Therma Bright and Bce

Assuming the 90 days trading horizon Therma Bright is expected to generate 12.78 times more return on investment than Bce. However, Therma Bright is 12.78 times more volatile than Bce Inc Pref. It trades about 0.08 of its potential returns per unit of risk. Bce Inc Pref is currently generating about 0.11 per unit of risk. If you would invest  4.50  in Therma Bright on October 24, 2024 and sell it today you would earn a total of  0.50  from holding Therma Bright or generate 11.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Therma Bright  vs.  Bce Inc Pref

Therma Bright

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Therma Bright are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Therma Bright showed solid returns over the last few months and may actually be approaching a breakup point.

Bce Inc Pref

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bce Inc Pref are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Bce may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Therma Bright and Bce

The main advantage of trading using opposite Therma Bright and Bce positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Therma Bright 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 Therma Bright and Bce Inc Pref 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.