Correlation Between Royalty Management and Bright Scholar

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

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

Diversification Opportunities for Royalty Management and Bright Scholar

0.39

Correlation Coefficient

Royalty Management  Bright Scholar

Weak diversification

The 3 months correlation between Royalty and Bright is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Royalty Management Holding 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 Royalty Management 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 Royalty Management Holding 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 Royalty Management i.e., Royalty Management and Bright Scholar go up and down completely randomly.

Pair Corralation between Royalty Management and Bright Scholar

Given the investment horizon of 90 days Royalty Management Holding is expected to under-perform the Bright Scholar. But the stock apears to be less risky and, when comparing its historical volatility, Royalty Management Holding is 1.75 times less risky than Bright Scholar. The stock trades about -0.02 of its potential returns per unit of risk. The Bright Scholar Education is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  143.00  in Bright Scholar Education on December 21, 2024 and sell it today you would earn a total of  47.00  from holding Bright Scholar Education or generate 32.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.31%
Values	Daily Returns

Royalty Management Holding  vs.  Bright Scholar Education

Royalty Management

Risk-Adjusted Performance

Very Weak

Over the last 90 days Royalty Management Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Royalty Management is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Bright Scholar Education

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bright Scholar Education are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Bright Scholar unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Royalty Management and Bright Scholar

The main advantage of trading using opposite Royalty Management and Bright Scholar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royalty Management 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 Royalty Management Holding 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.