Correlation Between BCE and Zhihu
Can any of the company-specific risk be diversified away by investing in both BCE and Zhihu 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 BCE and Zhihu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BCE Inc and Zhihu Inc ADR, you can compare the effects of market volatilities on BCE and Zhihu 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 BCE with a short position of Zhihu. Check out your portfolio center. Please also check ongoing floating volatility patterns of BCE and Zhihu.
Diversification Opportunities for BCE and Zhihu
Good diversification
The 3 months correlation between BCE and Zhihu is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding BCE Inc and Zhihu Inc ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhihu Inc ADR and BCE 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 BCE Inc are associated (or correlated) with Zhihu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhihu Inc ADR has no effect on the direction of BCE i.e., BCE and Zhihu go up and down completely randomly.
Pair Corralation between BCE and Zhihu
Considering the 90-day investment horizon BCE Inc is expected to under-perform the Zhihu. But the stock apears to be less risky and, when comparing its historical volatility, BCE Inc is 3.13 times less risky than Zhihu. The stock trades about -0.13 of its potential returns per unit of risk. The Zhihu Inc ADR is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 467.00 in Zhihu Inc ADR on August 28, 2024 and sell it today you would lose (99.00) from holding Zhihu Inc ADR or give up 21.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BCE Inc vs. Zhihu Inc ADR
Performance |
| Timeline |
| BCE Inc |
| Zhihu Inc ADR |
BCE and Zhihu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BCE and Zhihu
The main advantage of trading using opposite BCE and Zhihu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BCE position performs unexpectedly, Zhihu 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 Zhihu will offset losses from the drop in Zhihu's long position.| BCE vs. Liberty Broadband Srs | BCE vs. Ribbon Communications | BCE vs. Liberty Broadband Srs | BCE vs. Shenandoah Telecommunications Co |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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