Correlation Between Four Seasons and Bright Scholar
Can any of the company-specific risk be diversified away by investing in both Four Seasons 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 Four Seasons and Bright Scholar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Four Seasons Education and Bright Scholar Education, you can compare the effects of market volatilities on Four Seasons 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 Four Seasons with a short position of Bright Scholar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Four Seasons and Bright Scholar.
Diversification Opportunities for Four Seasons and Bright Scholar
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Four and Bright is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Four Seasons Education 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 Four Seasons 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 Four Seasons Education 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 Four Seasons i.e., Four Seasons and Bright Scholar go up and down completely randomly.
Pair Corralation between Four Seasons and Bright Scholar
Given the investment horizon of 90 days Four Seasons Education is expected to under-perform the Bright Scholar. In addition to that, Four Seasons is 1.8 times more volatile than Bright Scholar Education. It trades about -0.13 of its total potential returns per unit of risk. Bright Scholar Education is currently generating about -0.01 per unit of volatility. If you would invest 193.00 in Bright Scholar Education on August 28, 2024 and sell it today you would lose (8.00) from holding Bright Scholar Education or give up 4.15% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Four Seasons Education vs. Bright Scholar Education
Performance |
| Timeline |
| Four Seasons Education |
| Bright Scholar Education |
Four Seasons and Bright Scholar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Four Seasons and Bright Scholar
The main advantage of trading using opposite Four Seasons and Bright Scholar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Four Seasons 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.| Four Seasons vs. American Public Education | Four Seasons vs. Lincoln Educational Services | Four Seasons vs. Adtalem Global Education |
| Bright Scholar vs. American Public Education | Bright Scholar vs. Lincoln Educational Services | Bright Scholar vs. Adtalem Global Education |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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