Correlation Between Musti Group and Bright Horizons

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Can any of the company-specific risk be diversified away by investing in both Musti Group 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 Musti Group and Bright Horizons into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Musti Group Oyj and Bright Horizons Family, you can compare the effects of market volatilities on Musti Group 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 Musti Group with a short position of Bright Horizons. Check out your portfolio center. Please also check ongoing floating volatility patterns of Musti Group and Bright Horizons.

Diversification Opportunities for Musti Group and Bright Horizons

0.64
  Correlation Coefficient

Poor diversification

The 3 months correlation between Musti and Bright is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Musti Group Oyj 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 Musti Group 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 Musti Group Oyj 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 Musti Group i.e., Musti Group and Bright Horizons go up and down completely randomly.

Pair Corralation between Musti Group and Bright Horizons

Assuming the 90 days horizon Musti Group is expected to generate 4.02 times less return on investment than Bright Horizons. But when comparing it to its historical volatility, Musti Group Oyj is 1.13 times less risky than Bright Horizons. It trades about 0.07 of its potential returns per unit of risk. Bright Horizons Family is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  10,600  in Bright Horizons Family on November 2, 2024 and sell it today you would earn a total of  1,000.00  from holding Bright Horizons Family or generate 9.43% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Musti Group Oyj  vs.  Bright Horizons Family

 Performance 
       Timeline  
Musti Group Oyj 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Musti Group Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.
Bright Horizons Family 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Bright Horizons Family has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Bright Horizons is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Musti Group and Bright Horizons Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Musti Group and Bright Horizons

The main advantage of trading using opposite Musti Group and Bright Horizons positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Musti Group 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 Musti Group Oyj 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.
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.

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