Correlation Between Bright Scholar and Mach Natural

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

Diversification Opportunities for Bright Scholar and Mach Natural

0.44

Correlation Coefficient

Bright Scholar  Mach Natural

Very weak diversification

The 3 months correlation between Bright and Mach is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Bright Scholar Education and Mach Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mach Natural Resources 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 Mach Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mach Natural Resources has no effect on the direction of Bright Scholar i.e., Bright Scholar and Mach Natural go up and down completely randomly.

Pair Corralation between Bright Scholar and Mach Natural

Given the investment horizon of 90 days Bright Scholar Education is expected to under-perform the Mach Natural. In addition to that, Bright Scholar is 3.32 times more volatile than Mach Natural Resources. It trades about -0.01 of its total potential returns per unit of risk. Mach Natural Resources is currently generating about -0.02 per unit of volatility. If you would invest  1,594  in Mach Natural Resources on December 27, 2024 and sell it today you would lose (49.00) from holding Mach Natural Resources or give up 3.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.72%
Values	Daily Returns

Bright Scholar Education  vs.  Mach Natural Resources

Bright Scholar Education

Risk-Adjusted Performance

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.

Mach Natural Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mach Natural Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Mach Natural is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Bright Scholar and Mach Natural

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

The idea behind Bright Scholar Education and Mach Natural Resources 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.

Check out your portfolio center.

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 .