Correlation Between Bright Scholar and Natural Alternatives

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

Diversification Opportunities for Bright Scholar and Natural Alternatives

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Correlation Coefficient

Bright Scholar  Natural Alternatives

Pay attention - limited upside

The 3 months correlation between Bright and Natural is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Bright Scholar Education and Natural Alternatives Internati in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natural Alternatives 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 Natural Alternatives. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natural Alternatives has no effect on the direction of Bright Scholar i.e., Bright Scholar and Natural Alternatives go up and down completely randomly.

Pair Corralation between Bright Scholar and Natural Alternatives

Given the investment horizon of 90 days Bright Scholar Education is expected to generate 1.73 times more return on investment than Natural Alternatives. However, Bright Scholar is 1.73 times more volatile than Natural Alternatives International. It trades about 0.04 of its potential returns per unit of risk. Natural Alternatives International is currently generating about -0.05 per unit of risk. If you would invest  150.00  in Bright Scholar Education on September 8, 2024 and sell it today you would earn a total of  37.00  from holding Bright Scholar Education or generate 24.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	97.99%
Values	Daily Returns

Bright Scholar Education  vs.  Natural Alternatives Internati

Bright Scholar Education

Risk-Adjusted Performance

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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.

Natural Alternatives

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Natural Alternatives International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Bright Scholar and Natural Alternatives

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

The idea behind Bright Scholar Education and Natural Alternatives International 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.