Correlation Between Bright Scholar and Relx PLC

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

Diversification Opportunities for Bright Scholar and Relx PLC

0.07
  Correlation Coefficient

Significant diversification

The 3 months correlation between Bright and Relx is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Bright Scholar Education and Relx PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Relx PLC ADR and Bright Scholar 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 Bright Scholar Education are associated (or correlated) with Relx PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Relx PLC ADR has no effect on the direction of Bright Scholar i.e., Bright Scholar and Relx PLC go up and down completely randomly.

Pair Corralation between Bright Scholar and Relx PLC

Given the investment horizon of 90 days Bright Scholar Education is expected to generate 2.14 times more return on investment than Relx PLC. However, Bright Scholar is 2.14 times more volatile than Relx PLC ADR. It trades about 0.0 of its potential returns per unit of risk. Relx PLC ADR is currently generating about -0.1 per unit of risk. If you would invest  186.00  in Bright Scholar Education on August 28, 2024 and sell it today you would lose (1.00) from holding Bright Scholar Education or give up 0.54% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy86.36%
ValuesDaily Returns

Bright Scholar Education  vs.  Relx PLC ADR

 Performance 
       Timeline  
Bright Scholar Education 

Risk-Adjusted Performance

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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 comparatively stable fundamental indicators, Bright Scholar is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.
Relx PLC ADR 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Relx PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, Relx PLC is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Bright Scholar and Relx PLC Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Bright Scholar and Relx PLC

The main advantage of trading using opposite Bright Scholar and Relx PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bright Scholar position performs unexpectedly, Relx PLC 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 Relx PLC will offset losses from the drop in Relx PLC's long position.
The idea behind Bright Scholar Education and Relx PLC ADR 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.

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