Correlation Between Frontdoor and Bright Horizons

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

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

Diversification Opportunities for Frontdoor and Bright Horizons

-0.36

Correlation Coefficient

Frontdoor  Bright Horizons

Very good diversification

The 3 months correlation between Frontdoor and Bright is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Frontdoor 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 Frontdoor 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 Frontdoor 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 Frontdoor i.e., Frontdoor and Bright Horizons go up and down completely randomly.

Pair Corralation between Frontdoor and Bright Horizons

Given the investment horizon of 90 days Frontdoor is expected to generate 0.72 times more return on investment than Bright Horizons. However, Frontdoor is 1.38 times less risky than Bright Horizons. It trades about 0.13 of its potential returns per unit of risk. Bright Horizons Family is currently generating about 0.0 per unit of risk. If you would invest  5,231  in Frontdoor on May 4, 2025 and sell it today you would earn a total of  579.00  from holding Frontdoor or generate 11.07% return on investment over 90 days.

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

Frontdoor  vs.  Bright Horizons Family

Frontdoor

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Frontdoor are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal fundamental indicators, Frontdoor may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Bright Horizons Family

Risk-Adjusted Performance

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 very healthy basic indicators, Bright Horizons is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Frontdoor and Bright Horizons

The main advantage of trading using opposite Frontdoor and Bright Horizons positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Frontdoor 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 Frontdoor 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.