Correlation Between Bright Scholar and KLA Tencor

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

Diversification Opportunities for Bright Scholar and KLA Tencor

0.4

Correlation Coefficient

Bright Scholar  KLA Tencor

Very weak diversification

The 3 months correlation between Bright and KLA is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Bright Scholar Education and KLA Tencor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KLA Tencor 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 KLA Tencor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KLA Tencor has no effect on the direction of Bright Scholar i.e., Bright Scholar and KLA Tencor go up and down completely randomly.

Pair Corralation between Bright Scholar and KLA Tencor

Given the investment horizon of 90 days Bright Scholar Education is expected to under-perform the KLA Tencor. In addition to that, Bright Scholar is 3.57 times more volatile than KLA Tencor. It trades about -0.03 of its total potential returns per unit of risk. KLA Tencor is currently generating about 0.15 per unit of volatility. If you would invest  65,237  in KLA Tencor on October 10, 2024 and sell it today you would earn a total of  3,693  from holding KLA Tencor or generate 5.66% 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.  KLA Tencor

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 uncertain 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.

KLA Tencor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KLA Tencor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Bright Scholar and KLA Tencor

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

The idea behind Bright Scholar Education and KLA Tencor 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.