Correlation Between Bright Scholar and Zhihu
Can any of the company-specific risk be diversified away by investing in both Bright Scholar 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 Bright Scholar and Zhihu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bright Scholar Education and Zhihu Inc ADR, you can compare the effects of market volatilities on Bright Scholar 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 Bright Scholar with a short position of Zhihu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bright Scholar and Zhihu.
Diversification Opportunities for Bright Scholar and Zhihu
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Bright and Zhihu is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Bright Scholar Education 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 Bright Scholar 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 Bright Scholar Education 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 Bright Scholar i.e., Bright Scholar and Zhihu go up and down completely randomly.
Pair Corralation between Bright Scholar and Zhihu
Given the investment horizon of 90 days Bright Scholar is expected to generate 4.02 times less return on investment than Zhihu. But when comparing it to its historical volatility, Bright Scholar Education is 1.3 times less risky than Zhihu. It trades about 0.0 of its potential returns per unit of risk. Zhihu Inc ADR is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 369.00 in Zhihu Inc ADR on August 28, 2024 and sell it today you would lose (1.00) from holding Zhihu Inc ADR or give up 0.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 90.91% |
| Values | Daily Returns |
Bright Scholar Education vs. Zhihu Inc ADR
Performance |
| Timeline |
| Bright Scholar Education |
| Zhihu Inc ADR |
Bright Scholar and Zhihu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bright Scholar and Zhihu
The main advantage of trading using opposite Bright Scholar and Zhihu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bright Scholar 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.The idea behind Bright Scholar Education and Zhihu Inc ADR 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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