Correlation Between BrightSpring Health and Weave Communications

Can any of the company-specific risk be diversified away by investing in both BrightSpring Health and Weave Communications 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 BrightSpring Health and Weave Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BrightSpring Health Services, and Weave Communications, you can compare the effects of market volatilities on BrightSpring Health and Weave Communications 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 BrightSpring Health with a short position of Weave Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of BrightSpring Health and Weave Communications.

Diversification Opportunities for BrightSpring Health and Weave Communications

0.48

Correlation Coefficient

BrightSpring Health  Weave Communications

Very weak diversification

The 3 months correlation between BrightSpring and Weave is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding BrightSpring Health Services, and Weave Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weave Communications and BrightSpring Health 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 BrightSpring Health Services, are associated (or correlated) with Weave Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weave Communications has no effect on the direction of BrightSpring Health i.e., BrightSpring Health and Weave Communications go up and down completely randomly.

Pair Corralation between BrightSpring Health and Weave Communications

Assuming the 90 days horizon BrightSpring Health Services, is expected to under-perform the Weave Communications. But the stock apears to be less risky and, when comparing its historical volatility, BrightSpring Health Services, is 1.05 times less risky than Weave Communications. The stock trades about -0.23 of its potential returns per unit of risk. The Weave Communications is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest  1,372  in Weave Communications on October 1, 2024 and sell it today you would earn a total of  234.00  from holding Weave Communications or generate 17.06% return on investment over 90 days.

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

BrightSpring Health Services,  vs.  Weave Communications

BrightSpring Health

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BrightSpring Health Services, are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, BrightSpring Health unveiled solid returns over the last few months and may actually be approaching a breakup point.

Weave Communications

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Weave Communications are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Weave Communications showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BrightSpring Health and Weave Communications

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

The idea behind BrightSpring Health Services, and Weave Communications 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.