Correlation Between LB Foster and Bright Scholar

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Can any of the company-specific risk be diversified away by investing in both LB Foster 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 LB Foster and Bright Scholar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LB Foster and Bright Scholar Education, you can compare the effects of market volatilities on LB Foster 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 LB Foster with a short position of Bright Scholar. Check out your portfolio center. Please also check ongoing floating volatility patterns of LB Foster and Bright Scholar.

Diversification Opportunities for LB Foster and Bright Scholar

-0.59
  Correlation Coefficient

Excellent diversification

The 3 months correlation between FSTR and Bright is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding LB Foster 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 LB Foster 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 LB Foster 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 LB Foster i.e., LB Foster and Bright Scholar go up and down completely randomly.

Pair Corralation between LB Foster and Bright Scholar

Given the investment horizon of 90 days LB Foster is expected to generate 1.0 times more return on investment than Bright Scholar. However, LB Foster is 1.0 times more volatile than Bright Scholar Education. It trades about 0.17 of its potential returns per unit of risk. Bright Scholar Education is currently generating about -0.03 per unit of risk. If you would invest  2,005  in LB Foster on September 21, 2024 and sell it today you would earn a total of  684.00  from holding LB Foster or generate 34.11% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy96.83%
ValuesDaily Returns

LB Foster  vs.  Bright Scholar Education

 Performance 
       Timeline  
LB Foster 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in LB Foster are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, LB Foster reported solid returns over the last few months and may actually be approaching a breakup point.
Bright Scholar Education 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Bright Scholar Education has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

LB Foster and Bright Scholar Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with LB Foster and Bright Scholar

The main advantage of trading using opposite LB Foster and Bright Scholar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LB Foster 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 LB Foster 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.
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.

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