Correlation Between Bright Scholar and CarsalesCom

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

Diversification Opportunities for Bright Scholar and CarsalesCom

-0.42

Correlation Coefficient

Bright Scholar  CarsalesCom

Very good diversification

The 3 months correlation between Bright and CarsalesCom is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Bright Scholar Education and CarsalesCom Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarsalesCom ADR 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 CarsalesCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarsalesCom ADR has no effect on the direction of Bright Scholar i.e., Bright Scholar and CarsalesCom go up and down completely randomly.

Pair Corralation between Bright Scholar and CarsalesCom

Given the investment horizon of 90 days Bright Scholar is expected to generate 2.63 times less return on investment than CarsalesCom. In addition to that, Bright Scholar is 2.21 times more volatile than CarsalesCom Ltd ADR. It trades about 0.01 of its total potential returns per unit of risk. CarsalesCom Ltd ADR is currently generating about 0.08 per unit of volatility. If you would invest  2,618  in CarsalesCom Ltd ADR on September 24, 2024 and sell it today you would earn a total of  2,789  from holding CarsalesCom Ltd ADR or generate 106.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	89.47%
Values	Daily Returns

Bright Scholar Education  vs.  CarsalesCom Ltd ADR

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.

CarsalesCom ADR

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CarsalesCom Ltd ADR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, CarsalesCom may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bright Scholar and CarsalesCom

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

The idea behind Bright Scholar Education and CarsalesCom Ltd ADR 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 Stocks Directory module to find actively traded stocks across global markets.