Correlation Between STI Education and Bright Kindle

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

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

Diversification Opportunities for STI Education and Bright Kindle

0.45

Correlation Coefficient

STI Education  Bright Kindle

Very weak diversification

The 3 months correlation between STI and Bright is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding STI Education Systems and Bright Kindle Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bright Kindle Resources and STI Education 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 STI Education Systems are associated (or correlated) with Bright Kindle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bright Kindle Resources has no effect on the direction of STI Education i.e., STI Education and Bright Kindle go up and down completely randomly.

Pair Corralation between STI Education and Bright Kindle

Assuming the 90 days trading horizon STI Education is expected to generate 4.18 times less return on investment than Bright Kindle. But when comparing it to its historical volatility, STI Education Systems is 3.24 times less risky than Bright Kindle. It trades about 0.03 of its potential returns per unit of risk. Bright Kindle Resources is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  94.00  in Bright Kindle Resources on December 29, 2024 and sell it today you would earn a total of  5.00  from holding Bright Kindle Resources or generate 5.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	93.44%
Values	Daily Returns

STI Education Systems  vs.  Bright Kindle Resources

STI Education Systems

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in STI Education Systems are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, STI Education is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Bright Kindle Resources

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bright Kindle Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Bright Kindle exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with STI Education and Bright Kindle

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

The idea behind STI Education Systems and Bright Kindle Resources 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.