Correlation Between Bright Scholar and Wabash National

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

Diversification Opportunities for Bright Scholar and Wabash National

0.13

Correlation Coefficient

Bright Scholar  Wabash National

Average diversification

The 3 months correlation between Bright and Wabash is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Bright Scholar Education and Wabash National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wabash National 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 Wabash National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wabash National has no effect on the direction of Bright Scholar i.e., Bright Scholar and Wabash National go up and down completely randomly.

Pair Corralation between Bright Scholar and Wabash National

Given the investment horizon of 90 days Bright Scholar Education is expected to generate 2.2 times more return on investment than Wabash National. However, Bright Scholar is 2.2 times more volatile than Wabash National. It trades about 0.01 of its potential returns per unit of risk. Wabash National is currently generating about -0.02 per unit of risk. If you would invest  261.00  in Bright Scholar Education on October 7, 2024 and sell it today you would lose (93.00) from holding Bright Scholar Education or give up 35.63% of portfolio value over 90 days.

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

Bright Scholar Education  vs.  Wabash National

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.

Wabash National

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Bright Scholar and Wabash National

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

The idea behind Bright Scholar Education and Wabash National 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.