Correlation Between Allison and Bright Scholar

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

By analyzing existing cross correlation between Allison Transmission 5875 and Bright Scholar Education, you can compare the effects of market volatilities on Allison 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 Allison with a short position of Bright Scholar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allison and Bright Scholar.

Diversification Opportunities for Allison and Bright Scholar

0.46

Correlation Coefficient

Allison  Bright Scholar

Very weak diversification

The 3 months correlation between Allison and Bright is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Allison Transmission 5875 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 Allison 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 Allison Transmission 5875 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 Allison i.e., Allison and Bright Scholar go up and down completely randomly.

Pair Corralation between Allison and Bright Scholar

Assuming the 90 days trading horizon Allison Transmission 5875 is expected to under-perform the Bright Scholar. But the bond apears to be less risky and, when comparing its historical volatility, Allison Transmission 5875 is 2.99 times less risky than Bright Scholar. The bond trades about -0.29 of its potential returns per unit of risk. The Bright Scholar Education is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  187.00  in Bright Scholar Education on October 6, 2024 and sell it today you would lose (19.00) from holding Bright Scholar Education or give up 10.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	85.0%
Values	Daily Returns

Allison Transmission 5875  vs.  Bright Scholar Education

Allison Transmission 5875

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Allison Transmission 5875 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for Allison Transmission 5875 investors.

Bright Scholar Education

Risk-Adjusted Performance

0 of 100

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 Allison and Bright Scholar

The main advantage of trading using opposite Allison and Bright Scholar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allison 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 Allison Transmission 5875 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..