Correlation Between Bright Scholar and NATIONAL

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

Diversification Opportunities for Bright Scholar and NATIONAL

0.58

Correlation Coefficient

Bright Scholar  NATIONAL

Very weak diversification

The 3 months correlation between Bright and NATIONAL is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Bright Scholar Education and NATIONAL RURAL UTILS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NATIONAL RURAL UTILS 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 NATIONAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NATIONAL RURAL UTILS has no effect on the direction of Bright Scholar i.e., Bright Scholar and NATIONAL go up and down completely randomly.

Pair Corralation between Bright Scholar and NATIONAL

Given the investment horizon of 90 days Bright Scholar Education is expected to under-perform the NATIONAL. In addition to that, Bright Scholar is 10.13 times more volatile than NATIONAL RURAL UTILS. It trades about -0.04 of its total potential returns per unit of risk. NATIONAL RURAL UTILS is currently generating about -0.15 per unit of volatility. If you would invest  9,702  in NATIONAL RURAL UTILS on September 3, 2024 and sell it today you would lose (204.00) from holding NATIONAL RURAL UTILS or give up 2.1% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	70.49%
Values	Daily Returns

Bright Scholar Education  vs.  NATIONAL RURAL UTILS

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.

NATIONAL RURAL UTILS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NATIONAL RURAL UTILS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, NATIONAL 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 NATIONAL

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

The idea behind Bright Scholar Education and NATIONAL RURAL UTILS 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.