Correlation Between Rollins and Bright Horizons

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

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

Diversification Opportunities for Rollins and Bright Horizons

-0.08

Correlation Coefficient

Rollins  Bright Horizons

Good diversification

The 3 months correlation between Rollins and Bright is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Rollins and Bright Horizons Family in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bright Horizons Family and Rollins 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 Rollins are associated (or correlated) with Bright Horizons. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bright Horizons Family has no effect on the direction of Rollins i.e., Rollins and Bright Horizons go up and down completely randomly.

Pair Corralation between Rollins and Bright Horizons

Considering the 90-day investment horizon Rollins is expected to generate 0.69 times more return on investment than Bright Horizons. However, Rollins is 1.44 times less risky than Bright Horizons. It trades about 0.03 of its potential returns per unit of risk. Bright Horizons Family is currently generating about -0.14 per unit of risk. If you would invest  5,032  in Rollins on August 31, 2024 and sell it today you would earn a total of  84.00  from holding Rollins or generate 1.67% return on investment over 90 days.

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

Rollins  vs.  Bright Horizons Family

Rollins

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rollins are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Rollins is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Bright Horizons Family

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bright Horizons Family has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Rollins and Bright Horizons

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

The idea behind Rollins and Bright Horizons Family 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.