Correlation Between American Funds and Brightcove

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

By analyzing existing cross correlation between American Funds 2050 and Brightcove, you can compare the effects of market volatilities on American Funds and Brightcove 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 American Funds with a short position of Brightcove. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Brightcove.

Diversification Opportunities for American Funds and Brightcove

0.6

Correlation Coefficient

American Funds  Brightcove

Poor diversification

The 3 months correlation between American and Brightcove is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding American Funds 2050 and Brightcove in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brightcove and American Funds 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 American Funds 2050 are associated (or correlated) with Brightcove. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brightcove has no effect on the direction of American Funds i.e., American Funds and Brightcove go up and down completely randomly.

Pair Corralation between American Funds and Brightcove

Assuming the 90 days horizon American Funds is expected to generate 12.12 times less return on investment than Brightcove. But when comparing it to its historical volatility, American Funds 2050 is 5.59 times less risky than Brightcove. It trades about 0.09 of its potential returns per unit of risk. Brightcove is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  188.00  in Brightcove on March 5, 2024 and sell it today you would earn a total of  21.00  from holding Brightcove or generate 11.17% return on investment over 90 days.

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

American Funds 2050  vs.  Brightcove

American Funds 2050

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in American Funds 2050 are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, American Funds is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Brightcove

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Brightcove are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Brightcove is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with American Funds and Brightcove

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

The idea behind American Funds 2050 and Brightcove 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.