Correlation Between Bright Scholar and Guangdong Investment

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

Diversification Opportunities for Bright Scholar and Guangdong Investment

0.41

Correlation Coefficient

Bright Scholar  Guangdong Investment

Very weak diversification

The 3 months correlation between Bright and Guangdong is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Bright Scholar Education and Guangdong Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Investment 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 Guangdong Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Investment has no effect on the direction of Bright Scholar i.e., Bright Scholar and Guangdong Investment go up and down completely randomly.

Pair Corralation between Bright Scholar and Guangdong Investment

Given the investment horizon of 90 days Bright Scholar is expected to generate 12.72 times less return on investment than Guangdong Investment. But when comparing it to its historical volatility, Bright Scholar Education is 2.8 times less risky than Guangdong Investment. It trades about 0.05 of its potential returns per unit of risk. Guangdong Investment Limited is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  61.00  in Guangdong Investment Limited on September 16, 2024 and sell it today you would earn a total of  22.00  from holding Guangdong Investment Limited or generate 36.07% return on investment over 90 days.

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

Bright Scholar Education  vs.  Guangdong Investment Limited

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.

Guangdong Investment

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Investment Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Guangdong Investment reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bright Scholar and Guangdong Investment

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

The idea behind Bright Scholar Education and Guangdong Investment Limited 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.