Correlation Between Bright Rock and New Economy
Can any of the company-specific risk be diversified away by investing in both Bright Rock and New Economy 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 Rock and New Economy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bright Rock Mid and New Economy Fund, you can compare the effects of market volatilities on Bright Rock and New Economy 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 Rock with a short position of New Economy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bright Rock and New Economy.
Diversification Opportunities for Bright Rock and New Economy
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bright and New is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Bright Rock Mid and New Economy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Economy Fund and Bright Rock 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 Rock Mid are associated (or correlated) with New Economy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Economy Fund has no effect on the direction of Bright Rock i.e., Bright Rock and New Economy go up and down completely randomly.
Pair Corralation between Bright Rock and New Economy
Assuming the 90 days horizon Bright Rock Mid is expected to generate 0.71 times more return on investment than New Economy. However, Bright Rock Mid is 1.4 times less risky than New Economy. It trades about 0.14 of its potential returns per unit of risk. New Economy Fund is currently generating about 0.1 per unit of risk. If you would invest 2,427 in Bright Rock Mid on September 1, 2024 and sell it today you would earn a total of 329.00 from holding Bright Rock Mid or generate 13.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bright Rock Mid vs. New Economy Fund
Performance |
| Timeline |
| Bright Rock Mid |
| New Economy Fund |
Bright Rock and New Economy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bright Rock and New Economy
The main advantage of trading using opposite Bright Rock and New Economy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bright Rock position performs unexpectedly, New Economy 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 New Economy will offset losses from the drop in New Economy's long position.| Bright Rock vs. Quantitative Longshort Equity | Bright Rock vs. Old Westbury Short Term | Bright Rock vs. Franklin Federal Limited Term | Bright Rock vs. Aqr Sustainable Long Short |
| New Economy vs. Qs Small Capitalization | New Economy vs. Small Pany Growth | New Economy vs. Champlain Small | New Economy vs. The Hartford Small |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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