Correlation Between Bright Scholar and Constellation Brands

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

Diversification Opportunities for Bright Scholar and Constellation Brands

0.16

Correlation Coefficient

Bright Scholar  Constellation Brands

Average diversification

The 3 months correlation between Bright and Constellation is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Bright Scholar Education and Constellation Brands Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Constellation Brands 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 Constellation Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Constellation Brands has no effect on the direction of Bright Scholar i.e., Bright Scholar and Constellation Brands go up and down completely randomly.

Pair Corralation between Bright Scholar and Constellation Brands

Given the investment horizon of 90 days Bright Scholar Education is expected to generate 2.32 times more return on investment than Constellation Brands. However, Bright Scholar is 2.32 times more volatile than Constellation Brands Class. It trades about 0.03 of its potential returns per unit of risk. Constellation Brands Class is currently generating about -0.05 per unit of risk. If you would invest  184.00  in Bright Scholar Education on September 13, 2024 and sell it today you would earn a total of  6.00  from holding Bright Scholar Education or generate 3.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

Bright Scholar Education  vs.  Constellation Brands Class

Bright Scholar Education

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bright Scholar Education are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Constellation Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Constellation Brands Class has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Constellation Brands is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bright Scholar and Constellation Brands

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

The idea behind Bright Scholar Education and Constellation Brands Class 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.