Correlation Between Bright Scholar and Montauk Renewables

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

Diversification Opportunities for Bright Scholar and Montauk Renewables

-0.01

Correlation Coefficient

Bright Scholar  Montauk Renewables

Good diversification

The 3 months correlation between Bright and Montauk is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Bright Scholar Education and Montauk Renewables in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Montauk Renewables 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 Montauk Renewables. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Montauk Renewables has no effect on the direction of Bright Scholar i.e., Bright Scholar and Montauk Renewables go up and down completely randomly.

Pair Corralation between Bright Scholar and Montauk Renewables

Given the investment horizon of 90 days Bright Scholar Education is expected to generate 0.7 times more return on investment than Montauk Renewables. However, Bright Scholar Education is 1.43 times less risky than Montauk Renewables. It trades about -0.19 of its potential returns per unit of risk. Montauk Renewables is currently generating about -0.17 per unit of risk. If you would invest  185.00  in Bright Scholar Education on December 5, 2024 and sell it today you would lose (28.00) from holding Bright Scholar Education or give up 15.14% of portfolio value over 90 days.

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

Bright Scholar Education  vs.  Montauk Renewables

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 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.

Montauk Renewables

Risk-Adjusted Performance

Very Weak

Over the last 90 days Montauk Renewables has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Bright Scholar and Montauk Renewables

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

The idea behind Bright Scholar Education and Montauk Renewables 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.