Correlation Between BCE and MicroAlgo

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

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

Diversification Opportunities for BCE and MicroAlgo

-0.28

Correlation Coefficient

BCE  MicroAlgo

Very good diversification

The 3 months correlation between BCE and MicroAlgo is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding BCE Inc and MicroAlgo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroAlgo and BCE 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 BCE Inc are associated (or correlated) with MicroAlgo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroAlgo has no effect on the direction of BCE i.e., BCE and MicroAlgo go up and down completely randomly.

Pair Corralation between BCE and MicroAlgo

Considering the 90-day investment horizon BCE is expected to generate 229.54 times less return on investment than MicroAlgo. But when comparing it to its historical volatility, BCE Inc is 185.39 times less risky than MicroAlgo. It trades about 0.16 of its potential returns per unit of risk. MicroAlgo is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  257.00  in MicroAlgo on March 7, 2024 and sell it today you would earn a total of  944.00  from holding MicroAlgo or generate 367.32% return on investment over 90 days.

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

BCE Inc  vs.  MicroAlgo

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 rather sound fundamental indicators, BCE is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

MicroAlgo

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MicroAlgo are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, MicroAlgo displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BCE and MicroAlgo

The main advantage of trading using opposite BCE and MicroAlgo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BCE position performs unexpectedly, MicroAlgo 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 MicroAlgo will offset losses from the drop in MicroAlgo's long position.

The idea behind BCE Inc and MicroAlgo 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.