Correlation Between Bright Scholar and Cogna Educacao

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

Diversification Opportunities for Bright Scholar and Cogna Educacao

-0.21

Correlation Coefficient

Bright Scholar  Cogna Educacao

Very good diversification

The 3 months correlation between Bright and Cogna is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Bright Scholar Education and Cogna Educacao SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cogna Educacao SA 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 Cogna Educacao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cogna Educacao SA has no effect on the direction of Bright Scholar i.e., Bright Scholar and Cogna Educacao go up and down completely randomly.

Pair Corralation between Bright Scholar and Cogna Educacao

Given the investment horizon of 90 days Bright Scholar Education is expected to under-perform the Cogna Educacao. But the stock apears to be less risky and, when comparing its historical volatility, Bright Scholar Education is 1.76 times less risky than Cogna Educacao. The stock trades about -0.04 of its potential returns per unit of risk. The Cogna Educacao SA is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  27.00  in Cogna Educacao SA on September 1, 2024 and sell it today you would lose (3.00) from holding Cogna Educacao SA or give up 11.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Bright Scholar Education  vs.  Cogna Educacao SA

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 inconsistent 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.

Cogna Educacao SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cogna Educacao SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Cogna Educacao is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bright Scholar and Cogna Educacao

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

The idea behind Bright Scholar Education and Cogna Educacao SA 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.