Correlation Between Bright Horizons and Park Lawn

Can any of the company-specific risk be diversified away by investing in both Bright Horizons and Park Lawn 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 Park Lawn 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 Park Lawn, you can compare the effects of market volatilities on Bright Horizons and Park Lawn 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 Park Lawn. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bright Horizons and Park Lawn.

Diversification Opportunities for Bright Horizons and Park Lawn

-0.55

Correlation Coefficient

Bright Horizons  Park Lawn

Excellent diversification

The 3 months correlation between Bright and Park is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Bright Horizons Family and Park Lawn in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Park Lawn 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 Park Lawn. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Park Lawn has no effect on the direction of Bright Horizons i.e., Bright Horizons and Park Lawn go up and down completely randomly.

Pair Corralation between Bright Horizons and Park Lawn

If you would invest  1,923  in Park Lawn on September 4, 2024 and sell it today you would earn a total of  0.00  from holding Park Lawn or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	1.56%
Values	Daily Returns

Bright Horizons Family  vs.  Park Lawn

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.

Park Lawn

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Park Lawn has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Park Lawn is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Bright Horizons and Park Lawn

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

The idea behind Bright Horizons Family and Park Lawn 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.

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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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.