Correlation Between Bright Scholar and Cars

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

Diversification Opportunities for Bright Scholar and Cars

-0.6

Correlation Coefficient

Bright Scholar  Cars

Excellent diversification

The 3 months correlation between Bright and Cars is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Bright Scholar Education and Cars Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cars Inc 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 Cars. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cars Inc has no effect on the direction of Bright Scholar i.e., Bright Scholar and Cars go up and down completely randomly.

Pair Corralation between Bright Scholar and Cars

Given the investment horizon of 90 days Bright Scholar is expected to generate 1.02 times less return on investment than Cars. In addition to that, Bright Scholar is 2.17 times more volatile than Cars Inc. It trades about 0.01 of its total potential returns per unit of risk. Cars Inc is currently generating about 0.03 per unit of volatility. If you would invest  1,384  in Cars Inc on September 24, 2024 and sell it today you would earn a total of  362.00  from holding Cars Inc or generate 26.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.2%
Values	Daily Returns

Bright Scholar Education  vs.  Cars Inc

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 comparatively stable fundamental indicators, Bright Scholar is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Cars Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cars Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Cars is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Bright Scholar and Cars

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

The idea behind Bright Scholar Education and Cars Inc 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .