Correlation Between United Homes and Bright Scholar

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

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

Diversification Opportunities for United Homes and Bright Scholar

0.27

Correlation Coefficient

United Homes  Bright Scholar

Modest diversification

The 3 months correlation between United and Bright is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding United Homes 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 United Homes 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 United Homes 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 United Homes i.e., United Homes and Bright Scholar go up and down completely randomly.

Pair Corralation between United Homes and Bright Scholar

Considering the 90-day investment horizon United Homes Group is expected to under-perform the Bright Scholar. But the stock apears to be less risky and, when comparing its historical volatility, United Homes Group is 1.33 times less risky than Bright Scholar. The stock trades about -0.11 of its potential returns per unit of risk. The Bright Scholar Education is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  171.00  in Bright Scholar Education on December 28, 2024 and sell it today you would earn a total of  1.00  from holding Bright Scholar Education or generate 0.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

United Homes Group  vs.  Bright Scholar Education

United Homes Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days United Homes Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Bright Scholar Education

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bright Scholar Education are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, Bright Scholar may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with United Homes and Bright Scholar

The main advantage of trading using opposite United Homes and Bright Scholar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Homes 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 United Homes 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.