Correlation Between Bright Scholar and PennantPark Investment

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

Diversification Opportunities for Bright Scholar and PennantPark Investment

-0.09

Correlation Coefficient

Bright Scholar  PennantPark Investment

Good diversification

The 3 months correlation between Bright and PennantPark is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Bright Scholar Education and PennantPark Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennantPark Investment 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 PennantPark Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PennantPark Investment has no effect on the direction of Bright Scholar i.e., Bright Scholar and PennantPark Investment go up and down completely randomly.

Pair Corralation between Bright Scholar and PennantPark Investment

Given the investment horizon of 90 days Bright Scholar is expected to generate 1.7 times less return on investment than PennantPark Investment. In addition to that, Bright Scholar is 4.0 times more volatile than PennantPark Investment. It trades about 0.01 of its total potential returns per unit of risk. PennantPark Investment is currently generating about 0.08 per unit of volatility. If you would invest  443.00  in PennantPark Investment on September 9, 2024 and sell it today you would earn a total of  243.00  from holding PennantPark Investment or generate 54.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.19%
Values	Daily Returns

Bright Scholar Education  vs.  PennantPark Investment

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 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.

PennantPark Investment

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PennantPark Investment are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, PennantPark Investment is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Bright Scholar and PennantPark Investment

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

The idea behind Bright Scholar Education and PennantPark Investment 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.