Correlation Between BCE and IHS Holding

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

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

Diversification Opportunities for BCE and IHS Holding

-0.66

Correlation Coefficient

BCE  IHS Holding

Excellent diversification

The 3 months correlation between BCE and IHS is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding BCE Inc and IHS Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IHS Holding 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 IHS Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IHS Holding has no effect on the direction of BCE i.e., BCE and IHS Holding go up and down completely randomly.

Pair Corralation between BCE and IHS Holding

Considering the 90-day investment horizon BCE Inc is expected to under-perform the IHS Holding. But the stock apears to be less risky and, when comparing its historical volatility, BCE Inc is 4.33 times less risky than IHS Holding. The stock trades about -0.08 of its potential returns per unit of risk. The IHS Holding is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  250.00  in IHS Holding on March 2, 2024 and sell it today you would earn a total of  85.00  from holding IHS Holding or generate 34.0% return on investment over 90 days.

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

BCE Inc  vs.  IHS Holding

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 recent stock price tumult, may contribute to shorter-term losses for the shareholders.

IHS Holding

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in IHS Holding are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent technical indicators, IHS Holding unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BCE and IHS Holding

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

The idea behind BCE Inc and IHS Holding 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.