Correlation Between Bain Capital and Brightsphere Investment

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

Diversification Opportunities for Bain Capital and Brightsphere Investment

0.63
  Correlation Coefficient

Poor diversification

The 3 months correlation between Bain and Brightsphere is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Bain Capital Specialty and Brightsphere Investment Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brightsphere Investment and Bain Capital 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 Bain Capital Specialty are associated (or correlated) with Brightsphere Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brightsphere Investment has no effect on the direction of Bain Capital i.e., Bain Capital and Brightsphere Investment go up and down completely randomly.

Pair Corralation between Bain Capital and Brightsphere Investment

Given the investment horizon of 90 days Bain Capital is expected to generate 1.0 times less return on investment than Brightsphere Investment. But when comparing it to its historical volatility, Bain Capital Specialty is 1.66 times less risky than Brightsphere Investment. It trades about 0.09 of its potential returns per unit of risk. Brightsphere Investment Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,069  in Brightsphere Investment Group on August 24, 2024 and sell it today you would earn a total of  1,030  from holding Brightsphere Investment Group or generate 49.78% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Bain Capital Specialty  vs.  Brightsphere Investment Group

 Performance 
       Timeline  
Bain Capital Specialty 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Bain Capital Specialty are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Bain Capital is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.
Brightsphere Investment 

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Brightsphere Investment Group are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward indicators, Brightsphere Investment reported solid returns over the last few months and may actually be approaching a breakup point.

Bain Capital and Brightsphere Investment Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Bain Capital and Brightsphere Investment

The main advantage of trading using opposite Bain Capital and Brightsphere Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bain Capital position performs unexpectedly, Brightsphere Investment 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 Brightsphere Investment will offset losses from the drop in Brightsphere Investment's long position.
The idea behind Bain Capital Specialty and Brightsphere Investment Group 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.

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