Correlation Between CRA International and BrightView Holdings

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

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

Diversification Opportunities for CRA International and BrightView Holdings

0.84

Correlation Coefficient

CRA International  BrightView Holdings

Very poor diversification

The 3 months correlation between CRA and BrightView is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding CRA International and BrightView Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BrightView Holdings and CRA International 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 CRA International are associated (or correlated) with BrightView Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BrightView Holdings has no effect on the direction of CRA International i.e., CRA International and BrightView Holdings go up and down completely randomly.

Pair Corralation between CRA International and BrightView Holdings

Given the investment horizon of 90 days CRA International is expected to generate 0.81 times more return on investment than BrightView Holdings. However, CRA International is 1.24 times less risky than BrightView Holdings. It trades about 0.12 of its potential returns per unit of risk. BrightView Holdings is currently generating about 0.09 per unit of risk. If you would invest  16,134  in CRA International on September 12, 2024 and sell it today you would earn a total of  2,628  from holding CRA International or generate 16.29% return on investment over 90 days.

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

CRA International  vs.  BrightView Holdings

CRA International

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CRA International are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, CRA International demonstrated solid returns over the last few months and may actually be approaching a breakup point.

BrightView Holdings

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BrightView Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, BrightView Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CRA International and BrightView Holdings

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

The idea behind CRA International and BrightView 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.