Correlation Between Bright Scholar and Bowhead Specialty

Can any of the company-specific risk be diversified away by investing in both Bright Scholar and Bowhead Specialty 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 Bowhead Specialty 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 Bowhead Specialty Holdings, you can compare the effects of market volatilities on Bright Scholar and Bowhead Specialty 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 Bowhead Specialty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bright Scholar and Bowhead Specialty.

Diversification Opportunities for Bright Scholar and Bowhead Specialty

-0.59

Correlation Coefficient

Bright Scholar  Bowhead Specialty

Excellent diversification

The 3 months correlation between Bright and Bowhead is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Bright Scholar Education and Bowhead Specialty Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bowhead Specialty 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 Bowhead Specialty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bowhead Specialty has no effect on the direction of Bright Scholar i.e., Bright Scholar and Bowhead Specialty go up and down completely randomly.

Pair Corralation between Bright Scholar and Bowhead Specialty

Given the investment horizon of 90 days Bright Scholar is expected to generate 3.95 times less return on investment than Bowhead Specialty. In addition to that, Bright Scholar is 1.47 times more volatile than Bowhead Specialty Holdings. It trades about 0.04 of its total potential returns per unit of risk. Bowhead Specialty Holdings is currently generating about 0.21 per unit of volatility. If you would invest  2,795  in Bowhead Specialty Holdings on September 15, 2024 and sell it today you would earn a total of  872.00  from holding Bowhead Specialty Holdings or generate 31.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.88%
Values	Daily Returns

Bright Scholar Education  vs.  Bowhead Specialty Holdings

Bright Scholar Education

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bright Scholar Education are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Bright Scholar may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Bowhead Specialty

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bowhead Specialty Holdings are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Bowhead Specialty showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bright Scholar and Bowhead Specialty

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

The idea behind Bright Scholar Education and Bowhead Specialty Holdings 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.