Correlation Between Loud Beverage and Bright Scholar

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

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

Diversification Opportunities for Loud Beverage and Bright Scholar

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Correlation Coefficient

Loud Beverage  Bright Scholar

Pay attention - limited upside

The 3 months correlation between Loud and Bright is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Loud Beverage Group 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 Loud Beverage 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 Loud Beverage Group 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 Loud Beverage i.e., Loud Beverage and Bright Scholar go up and down completely randomly.

Pair Corralation between Loud Beverage and Bright Scholar

Given the investment horizon of 90 days Loud Beverage Group is expected to under-perform the Bright Scholar. But the pink sheet apears to be less risky and, when comparing its historical volatility, Loud Beverage Group is 1.08 times less risky than Bright Scholar. The pink sheet trades about -0.01 of its potential returns per unit of risk. The Bright Scholar Education is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  251.00  in Bright Scholar Education on October 10, 2024 and sell it today you would lose (81.00) from holding Bright Scholar Education or give up 32.27% of portfolio value over 90 days.

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

Loud Beverage Group  vs.  Bright Scholar Education

Loud Beverage Group

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Loud Beverage Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, Loud Beverage is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Bright Scholar Education

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bright Scholar Education has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Loud Beverage and Bright Scholar

The main advantage of trading using opposite Loud Beverage and Bright Scholar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Loud Beverage 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 Loud Beverage Group 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.