Correlation Between Torm PLC and Bright Scholar
Can any of the company-specific risk be diversified away by investing in both Torm PLC 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 Torm PLC and Bright Scholar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Torm PLC Class and Bright Scholar Education, you can compare the effects of market volatilities on Torm PLC 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 Torm PLC with a short position of Bright Scholar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Torm PLC and Bright Scholar.
Diversification Opportunities for Torm PLC and Bright Scholar
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Torm and Bright is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Torm PLC Class 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 Torm PLC 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 Torm PLC Class 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 Torm PLC i.e., Torm PLC and Bright Scholar go up and down completely randomly.
Pair Corralation between Torm PLC and Bright Scholar
Given the investment horizon of 90 days Torm PLC Class is expected to under-perform the Bright Scholar. But the stock apears to be less risky and, when comparing its historical volatility, Torm PLC Class is 1.18 times less risky than Bright Scholar. The stock trades about -0.39 of its potential returns per unit of risk. The Bright Scholar Education is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 190.00 in Bright Scholar Education on August 26, 2024 and sell it today you would lose (7.00) from holding Bright Scholar Education or give up 3.68% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 90.91% |
| Values | Daily Returns |
Torm PLC Class vs. Bright Scholar Education
Performance |
| Timeline |
| Torm PLC Class |
| Bright Scholar Education |
Torm PLC and Bright Scholar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Torm PLC and Bright Scholar
The main advantage of trading using opposite Torm PLC and Bright Scholar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Torm PLC 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.The idea behind Torm PLC Class and Bright Scholar Education 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.| Bright Scholar vs. Laureate Education | Bright Scholar vs. China Liberal Education | Bright Scholar vs. Adtalem Global Education | Bright Scholar vs. Grand Canyon 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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