Correlation Between Bright Scholar and Modine Manufacturing

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

Diversification Opportunities for Bright Scholar and Modine Manufacturing

0.24

Correlation Coefficient

Bright Scholar  Modine Manufacturing

Modest diversification

The 3 months correlation between Bright and Modine is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Bright Scholar Education and Modine Manufacturing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Modine Manufacturing 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 Modine Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Modine Manufacturing has no effect on the direction of Bright Scholar i.e., Bright Scholar and Modine Manufacturing go up and down completely randomly.

Pair Corralation between Bright Scholar and Modine Manufacturing

Given the investment horizon of 90 days Bright Scholar is expected to generate 10.34 times less return on investment than Modine Manufacturing. In addition to that, Bright Scholar is 1.44 times more volatile than Modine Manufacturing. It trades about 0.01 of its total potential returns per unit of risk. Modine Manufacturing is currently generating about 0.11 per unit of volatility. If you would invest  2,244  in Modine Manufacturing on October 7, 2024 and sell it today you would earn a total of  10,000  from holding Modine Manufacturing or generate 445.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.19%
Values	Daily Returns

Bright Scholar Education  vs.  Modine Manufacturing

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.

Modine Manufacturing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Modine Manufacturing has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Modine Manufacturing is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Bright Scholar and Modine Manufacturing

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

The idea behind Bright Scholar Education and Modine Manufacturing 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.