Correlation Between Dupont De and Bright Horizons

Can any of the company-specific risk be diversified away by investing in both Dupont De and Bright Horizons 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 Dupont De and Bright Horizons into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dupont De Nemours and Bright Horizons Family, you can compare the effects of market volatilities on Dupont De and Bright Horizons 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 Dupont De with a short position of Bright Horizons. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dupont De and Bright Horizons.

Diversification Opportunities for Dupont De and Bright Horizons

0.53

Correlation Coefficient

Dupont De  Bright Horizons

Very weak diversification

The 3 months correlation between Dupont and Bright is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours and Bright Horizons Family in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bright Horizons Family and Dupont De 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 Dupont De Nemours are associated (or correlated) with Bright Horizons. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bright Horizons Family has no effect on the direction of Dupont De i.e., Dupont De and Bright Horizons go up and down completely randomly.

Pair Corralation between Dupont De and Bright Horizons

Allowing for the 90-day total investment horizon Dupont De is expected to generate 48.37 times less return on investment than Bright Horizons. But when comparing it to its historical volatility, Dupont De Nemours is 1.22 times less risky than Bright Horizons. It trades about 0.0 of its potential returns per unit of risk. Bright Horizons Family is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  11,053  in Bright Horizons Family on December 27, 2024 and sell it today you would earn a total of  1,845  from holding Bright Horizons Family or generate 16.69% return on investment over 90 days.

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

Dupont De Nemours  vs.  Bright Horizons Family

Dupont De Nemours

Risk-Adjusted Performance

Very Weak

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

Bright Horizons Family

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bright Horizons Family are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Bright Horizons displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dupont De and Bright Horizons

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

The idea behind Dupont De Nemours and Bright Horizons Family 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.