Correlation Between Brightsphere Investment and Noah Holdings

Can any of the company-specific risk be diversified away by investing in both Brightsphere Investment and Noah Holdings 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 Brightsphere Investment and Noah Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Brightsphere Investment Group and Noah Holdings, you can compare the effects of market volatilities on Brightsphere Investment and Noah Holdings 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 Brightsphere Investment with a short position of Noah Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brightsphere Investment and Noah Holdings.

Diversification Opportunities for Brightsphere Investment and Noah Holdings

0.39

Correlation Coefficient

Brightsphere Investment  Noah Holdings

Weak diversification

The 3 months correlation between Brightsphere and Noah is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Brightsphere Investment Group and Noah Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Noah Holdings and Brightsphere Investment 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 Brightsphere Investment Group are associated (or correlated) with Noah Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Noah Holdings has no effect on the direction of Brightsphere Investment i.e., Brightsphere Investment and Noah Holdings go up and down completely randomly.

Pair Corralation between Brightsphere Investment and Noah Holdings

Given the investment horizon of 90 days Brightsphere Investment is expected to generate 1.72 times less return on investment than Noah Holdings. But when comparing it to its historical volatility, Brightsphere Investment Group is 2.07 times less risky than Noah Holdings. It trades about 0.24 of its potential returns per unit of risk. Noah Holdings is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  825.00  in Noah Holdings on September 3, 2024 and sell it today you would earn a total of  487.00  from holding Noah Holdings or generate 59.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Brightsphere Investment Group  vs.  Noah Holdings

Brightsphere Investment

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Brightsphere Investment Group are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward indicators, Brightsphere Investment reported solid returns over the last few months and may actually be approaching a breakup point.

Noah Holdings

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Noah Holdings are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Noah Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brightsphere Investment and Noah Holdings

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

The idea behind Brightsphere Investment Group and Noah Holdings 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.