Correlation Between Herc Holdings and Bright Scholar

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

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

Diversification Opportunities for Herc Holdings and Bright Scholar

-0.38

Correlation Coefficient

Herc Holdings  Bright Scholar

Very good diversification

The 3 months correlation between Herc and Bright is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Herc Holdings and Bright Scholar Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bright Scholar Education and Herc Holdings 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 Herc Holdings are associated (or correlated) with Bright Scholar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bright Scholar Education has no effect on the direction of Herc Holdings i.e., Herc Holdings and Bright Scholar go up and down completely randomly.

Pair Corralation between Herc Holdings and Bright Scholar

Considering the 90-day investment horizon Herc Holdings is expected to generate 0.56 times more return on investment than Bright Scholar. However, Herc Holdings is 1.77 times less risky than Bright Scholar. It trades about 0.05 of its potential returns per unit of risk. Bright Scholar Education is currently generating about 0.01 per unit of risk. If you would invest  12,684  in Herc Holdings on September 14, 2024 and sell it today you would earn a total of  8,179  from holding Herc Holdings or generate 64.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.19%
Values	Daily Returns

Herc Holdings  vs.  Bright Scholar Education

Herc Holdings

Risk-Adjusted Performance

15 of 100

Solid

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

Bright Scholar Education

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bright Scholar Education are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Bright Scholar is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Herc Holdings and Bright Scholar

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

The idea behind Herc Holdings and Bright Scholar Education 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.