Correlation Between Associated Capital and Brightsphere Investment

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

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

Diversification Opportunities for Associated Capital and Brightsphere Investment

0.63

Correlation Coefficient

Associated Capital  Brightsphere Investment

Poor diversification

The 3 months correlation between Associated and Brightsphere is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Associated Capital Group and Brightsphere Investment Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brightsphere Investment and Associated Capital 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 Associated Capital Group are associated (or correlated) with Brightsphere Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brightsphere Investment has no effect on the direction of Associated Capital i.e., Associated Capital and Brightsphere Investment go up and down completely randomly.

Pair Corralation between Associated Capital and Brightsphere Investment

Allowing for the 90-day total investment horizon Associated Capital is expected to generate 1.77 times less return on investment than Brightsphere Investment. In addition to that, Associated Capital is 1.04 times more volatile than Brightsphere Investment Group. It trades about 0.12 of its total potential returns per unit of risk. Brightsphere Investment Group is currently generating about 0.22 per unit of volatility. If you would invest  2,374  in Brightsphere Investment Group on September 12, 2024 and sell it today you would earn a total of  677.00  from holding Brightsphere Investment Group or generate 28.52% return on investment over 90 days.

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

Associated Capital Group  vs.  Brightsphere Investment Group

Associated Capital

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Associated Capital Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, Associated Capital exhibited solid returns over the last few months and may actually be approaching a breakup point.

Brightsphere Investment

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Brightsphere Investment Group are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward indicators, Brightsphere Investment reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Associated Capital and Brightsphere Investment

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

The idea behind Associated Capital Group and Brightsphere Investment Group 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.