Correlation Between BCE and AETNA

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

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

Diversification Opportunities for BCE and AETNA

0.78

Correlation Coefficient

BCE  AETNA

Poor diversification

The 3 months correlation between BCE and AETNA is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding BCE Inc and AETNA INC NEW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AETNA INC NEW 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 AETNA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AETNA INC NEW has no effect on the direction of BCE i.e., BCE and AETNA go up and down completely randomly.

Pair Corralation between BCE and AETNA

Considering the 90-day investment horizon BCE Inc is expected to under-perform the AETNA. In addition to that, BCE is 1.69 times more volatile than AETNA INC NEW. It trades about -0.26 of its total potential returns per unit of risk. AETNA INC NEW is currently generating about -0.13 per unit of volatility. If you would invest  11,240  in AETNA INC NEW on September 4, 2024 and sell it today you would lose (705.00) from holding AETNA INC NEW or give up 6.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	87.5%
Values	Daily Returns

BCE Inc  vs.  AETNA INC NEW

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 inconsistent performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

AETNA INC NEW

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AETNA INC NEW has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for AETNA INC NEW investors.

Pair Trading with BCE and AETNA

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

The idea behind BCE Inc and AETNA INC NEW 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.