Correlation Between Mitie Group and Bright Horizons
Can any of the company-specific risk be diversified away by investing in both Mitie 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 Mitie 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 Mitie Group PLC and Bright Horizons Family, you can compare the effects of market volatilities on Mitie 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 Mitie Group with a short position of Bright Horizons. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mitie Group and Bright Horizons.
Diversification Opportunities for Mitie Group and Bright Horizons
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Mitie and Bright is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Mitie Group PLC 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 Mitie 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 Mitie Group PLC 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 Mitie Group i.e., Mitie Group and Bright Horizons go up and down completely randomly.
Pair Corralation between Mitie Group and Bright Horizons
Assuming the 90 days horizon Mitie Group PLC is expected to generate 0.69 times more return on investment than Bright Horizons. However, Mitie Group PLC is 1.45 times less risky than Bright Horizons. It trades about 0.11 of its potential returns per unit of risk. Bright Horizons Family is currently generating about -0.02 per unit of risk. If you would invest 116,200 in Mitie Group PLC on September 13, 2024 and sell it today you would earn a total of 4,150 from holding Mitie Group PLC or generate 3.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mitie Group PLC vs. Bright Horizons Family
Performance |
| Timeline |
| Mitie Group PLC |
| Bright Horizons Family |
Mitie Group and Bright Horizons Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mitie Group and Bright Horizons
The main advantage of trading using opposite Mitie Group and Bright Horizons positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mitie 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.| Mitie Group vs. Automatic Data Processing | Mitie Group vs. Datang International Power | Mitie Group vs. Lion One Metals | Mitie Group vs. Kaiser Aluminum |
| Bright Horizons vs. Service International | Bright Horizons vs. BOYD GROUP SERVICES | Bright Horizons vs. Frontdoor | Bright Horizons vs. CVS Group plc |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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