Correlation Between Bright Scholar and Ares Management

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

By analyzing existing cross correlation between Bright Scholar Education and Ares Management Corp, you can compare the effects of market volatilities on Bright Scholar and Ares Management 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 Bright Scholar with a short position of Ares Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bright Scholar and Ares Management.

Diversification Opportunities for Bright Scholar and Ares Management

-0.43

Correlation Coefficient

Bright Scholar  Ares Management

Very good diversification

The 3 months correlation between Bright and Ares is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Bright Scholar Education and Ares Management Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ares Management Corp and Bright Scholar 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 Bright Scholar Education are associated (or correlated) with Ares Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ares Management Corp has no effect on the direction of Bright Scholar i.e., Bright Scholar and Ares Management go up and down completely randomly.

Pair Corralation between Bright Scholar and Ares Management

Given the investment horizon of 90 days Bright Scholar is expected to generate 5.46 times less return on investment than Ares Management. In addition to that, Bright Scholar is 4.22 times more volatile than Ares Management Corp. It trades about 0.01 of its total potential returns per unit of risk. Ares Management Corp is currently generating about 0.12 per unit of volatility. If you would invest  5,490  in Ares Management Corp on October 11, 2024 and sell it today you would earn a total of  206.00  from holding Ares Management Corp or generate 3.75% return on investment over 90 days.

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

Bright Scholar Education  vs.  Ares Management Corp

Bright Scholar Education

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bright Scholar Education has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Ares Management Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Management Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental drivers, Ares Management may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Bright Scholar and Ares Management

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

The idea behind Bright Scholar Education and Ares Management Corp 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.