Correlation Between Boyd Group and Bright Horizons

Can any of the company-specific risk be diversified away by investing in both Boyd 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 Boyd 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 Boyd Group Services and Bright Horizons Family, you can compare the effects of market volatilities on Boyd 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 Boyd Group with a short position of Bright Horizons. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boyd Group and Bright Horizons.

Diversification Opportunities for Boyd Group and Bright Horizons

0.48

Correlation Coefficient

Boyd Group  Bright Horizons

Very weak diversification

The 3 months correlation between Boyd and Bright is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Boyd Group Services 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 Boyd 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 Boyd Group Services 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 Boyd Group i.e., Boyd Group and Bright Horizons go up and down completely randomly.

Pair Corralation between Boyd Group and Bright Horizons

Assuming the 90 days horizon Boyd Group Services is expected to generate 2.54 times more return on investment than Bright Horizons. However, Boyd Group is 2.54 times more volatile than Bright Horizons Family. It trades about 0.05 of its potential returns per unit of risk. Bright Horizons Family is currently generating about -0.25 per unit of risk. If you would invest  18,500  in Boyd Group Services on March 21, 2024 and sell it today you would earn a total of  513.00  from holding Boyd Group Services or generate 2.77% return on investment over 90 days.

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

Boyd Group Services  vs.  Bright Horizons Family

Boyd Group Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boyd Group Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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 latest fragile performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Boyd Group and Bright Horizons

The main advantage of trading using opposite Boyd Group and Bright Horizons positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boyd 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.

The idea behind Boyd Group Services and Bright Horizons Family 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..