Correlation Between Verizon Communications and BCE

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

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

Diversification Opportunities for Verizon Communications and BCE

-0.04

Correlation Coefficient

Verizon Communications  BCE

Good diversification

The 3 months correlation between Verizon and BCE is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications CDR 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 Verizon Communications 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 Verizon Communications CDR 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 Verizon Communications i.e., Verizon Communications and BCE go up and down completely randomly.

Pair Corralation between Verizon Communications and BCE

Assuming the 90 days trading horizon Verizon Communications CDR is expected to under-perform the BCE. In addition to that, Verizon Communications is 2.17 times more volatile than BCE Inc Pref. It trades about -0.12 of its total potential returns per unit of risk. BCE Inc Pref is currently generating about 0.09 per unit of volatility. If you would invest  1,684  in BCE Inc Pref on October 10, 2024 and sell it today you would earn a total of  56.00  from holding BCE Inc Pref or generate 3.33% return on investment over 90 days.

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

Verizon Communications CDR  vs.  BCE Inc Pref

Verizon Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Verizon Communications CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

BCE Inc Pref

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BCE Inc Pref are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, BCE is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Verizon Communications and BCE

The main advantage of trading using opposite Verizon Communications and BCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications 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 Verizon Communications CDR 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.