Correlation Between Zhihu and Bright Scholar
Can any of the company-specific risk be diversified away by investing in both Zhihu and Bright Scholar 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 Zhihu and Bright Scholar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Zhihu Inc ADR and Bright Scholar Education, you can compare the effects of market volatilities on Zhihu and Bright Scholar 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 Zhihu with a short position of Bright Scholar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhihu and Bright Scholar.
Diversification Opportunities for Zhihu and Bright Scholar
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Zhihu and Bright is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Zhihu Inc ADR and Bright Scholar Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bright Scholar Education and Zhihu 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 Zhihu Inc ADR are associated (or correlated) with Bright Scholar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bright Scholar Education has no effect on the direction of Zhihu i.e., Zhihu and Bright Scholar go up and down completely randomly.
Pair Corralation between Zhihu and Bright Scholar
Allowing for the 90-day total investment horizon Zhihu Inc ADR is expected to generate 1.29 times more return on investment than Bright Scholar. However, Zhihu is 1.29 times more volatile than Bright Scholar Education. It trades about 0.03 of its potential returns per unit of risk. Bright Scholar Education is currently generating about -0.05 per unit of risk. If you would invest 356.00 in Zhihu Inc ADR on August 25, 2024 and sell it today you would earn a total of 4.00 from holding Zhihu Inc ADR or generate 1.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 90.91% |
| Values | Daily Returns |
Zhihu Inc ADR vs. Bright Scholar Education
Performance |
| Timeline |
| Zhihu Inc ADR |
| Bright Scholar Education |
Zhihu and Bright Scholar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Zhihu and Bright Scholar
The main advantage of trading using opposite Zhihu and Bright Scholar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zhihu position performs unexpectedly, Bright Scholar 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 Scholar will offset losses from the drop in Bright Scholar's long position.The idea behind Zhihu Inc ADR and Bright Scholar Education 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.| Bright Scholar vs. Laureate Education | Bright Scholar vs. China Liberal Education | Bright Scholar vs. Adtalem Global Education | Bright Scholar vs. Grand Canyon Education |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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