Correlation Between Honest and BrightSpring Health

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

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

Diversification Opportunities for Honest and BrightSpring Health

0.09

Correlation Coefficient

Honest  BrightSpring Health

Significant diversification

The 3 months correlation between Honest and BrightSpring is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Honest Company and BrightSpring Health Services, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BrightSpring Health and Honest 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 Honest Company are associated (or correlated) with BrightSpring Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BrightSpring Health has no effect on the direction of Honest i.e., Honest and BrightSpring Health go up and down completely randomly.

Pair Corralation between Honest and BrightSpring Health

Given the investment horizon of 90 days Honest Company is expected to under-perform the BrightSpring Health. In addition to that, Honest is 1.34 times more volatile than BrightSpring Health Services,. It trades about -0.11 of its total potential returns per unit of risk. BrightSpring Health Services, is currently generating about 0.03 per unit of volatility. If you would invest  6,348  in BrightSpring Health Services, on December 22, 2024 and sell it today you would earn a total of  207.00  from holding BrightSpring Health Services, or generate 3.26% return on investment over 90 days.

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

Honest Company  vs.  BrightSpring Health Services,

Honest Company

Risk-Adjusted Performance

Very Weak

Over the last 90 days Honest Company 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 basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

BrightSpring Health

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BrightSpring Health Services, are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, BrightSpring Health is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Honest and BrightSpring Health

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

The idea behind Honest Company and BrightSpring Health Services, 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.