Correlation Between BBB Foods and Bright Scholar

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

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

Diversification Opportunities for BBB Foods and Bright Scholar

0.34

Correlation Coefficient

BBB Foods  Bright Scholar

Weak diversification

The 3 months correlation between BBB and Bright is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding BBB Foods 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 BBB Foods 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 BBB Foods 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 BBB Foods i.e., BBB Foods and Bright Scholar go up and down completely randomly.

Pair Corralation between BBB Foods and Bright Scholar

Given the investment horizon of 90 days BBB Foods is expected to under-perform the Bright Scholar. But the stock apears to be less risky and, when comparing its historical volatility, BBB Foods is 1.68 times less risky than Bright Scholar. The stock trades about -0.43 of its potential returns per unit of risk. The Bright Scholar Education is currently generating about -0.19 of returns per unit of risk over similar time horizon. If you would invest  185.00  in Bright Scholar Education on December 5, 2024 and sell it today you would lose (28.00) from holding Bright Scholar Education or give up 15.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

BBB Foods  vs.  Bright Scholar Education

BBB Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days BBB Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Bright Scholar Education

Risk-Adjusted Performance

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 BBB Foods and Bright Scholar

The main advantage of trading using opposite BBB Foods and Bright Scholar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BBB Foods 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 BBB Foods 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.

Check out your portfolio center.

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 Stocks Directory module to find actively traded stocks across global markets.