Correlation Between Bright Horizons and MEDIFAST INC

Can any of the company-specific risk be diversified away by investing in both Bright Horizons and MEDIFAST INC 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 Horizons and MEDIFAST INC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bright Horizons Family and MEDIFAST INC, you can compare the effects of market volatilities on Bright Horizons and MEDIFAST INC 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 Horizons with a short position of MEDIFAST INC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bright Horizons and MEDIFAST INC.

Diversification Opportunities for Bright Horizons and MEDIFAST INC

-0.23

Correlation Coefficient

Bright Horizons  MEDIFAST INC

Very good diversification

The 3 months correlation between Bright and MEDIFAST is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Bright Horizons Family and MEDIFAST INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MEDIFAST INC and Bright Horizons 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 Horizons Family are associated (or correlated) with MEDIFAST INC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MEDIFAST INC has no effect on the direction of Bright Horizons i.e., Bright Horizons and MEDIFAST INC go up and down completely randomly.

Pair Corralation between Bright Horizons and MEDIFAST INC

Given the investment horizon of 90 days Bright Horizons Family is expected to under-perform the MEDIFAST INC. But the stock apears to be less risky and, when comparing its historical volatility, Bright Horizons Family is 1.26 times less risky than MEDIFAST INC. The stock trades about -0.15 of its potential returns per unit of risk. The MEDIFAST INC is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,877  in MEDIFAST INC on September 12, 2024 and sell it today you would earn a total of  299.00  from holding MEDIFAST INC or generate 15.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Bright Horizons Family  vs.  MEDIFAST INC

Bright Horizons Family

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bright Horizons Family has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

MEDIFAST INC

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MEDIFAST INC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting technical and fundamental indicators, MEDIFAST INC exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bright Horizons and MEDIFAST INC

The main advantage of trading using opposite Bright Horizons and MEDIFAST INC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bright Horizons position performs unexpectedly, MEDIFAST INC 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 MEDIFAST INC will offset losses from the drop in MEDIFAST INC's long position.

The idea behind Bright Horizons Family and MEDIFAST INC 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.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..