Correlation Between Equifax and BrightView Holdings

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

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

Diversification Opportunities for Equifax and BrightView Holdings

-0.54

Correlation Coefficient

Equifax  BrightView Holdings

Excellent diversification

The 3 months correlation between Equifax and BrightView is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Equifax and BrightView Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BrightView Holdings and Equifax 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 Equifax 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 Equifax i.e., Equifax and BrightView Holdings go up and down completely randomly.

Pair Corralation between Equifax and BrightView Holdings

Considering the 90-day investment horizon Equifax is expected to under-perform the BrightView Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Equifax is 1.69 times less risky than BrightView Holdings. The stock trades about -0.15 of its potential returns per unit of risk. The BrightView Holdings is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,551  in BrightView Holdings on September 3, 2024 and sell it today you would earn a total of  182.00  from holding BrightView Holdings or generate 11.73% return on investment over 90 days.

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

Equifax  vs.  BrightView Holdings

Equifax

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Equifax has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

BrightView Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BrightView Holdings are ranked lower than 6 (%) 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 Equifax and BrightView Holdings

The main advantage of trading using opposite Equifax and BrightView Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equifax 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 Equifax 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.