Correlation Between Bright Scholar and ZKH Group

Can any of the company-specific risk be diversified away by investing in both Bright Scholar and ZKH Group 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 ZKH Group 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 ZKH Group Limited, you can compare the effects of market volatilities on Bright Scholar and ZKH Group 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 ZKH Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bright Scholar and ZKH Group.

Diversification Opportunities for Bright Scholar and ZKH Group

0.06

Correlation Coefficient

Bright Scholar  ZKH Group

Significant diversification

The 3 months correlation between Bright and ZKH is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Bright Scholar Education and ZKH Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZKH Group Limited 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 ZKH Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZKH Group Limited has no effect on the direction of Bright Scholar i.e., Bright Scholar and ZKH Group go up and down completely randomly.

Pair Corralation between Bright Scholar and ZKH Group

Given the investment horizon of 90 days Bright Scholar is expected to generate 4.1 times less return on investment than ZKH Group. But when comparing it to its historical volatility, Bright Scholar Education is 1.09 times less risky than ZKH Group. It trades about 0.03 of its potential returns per unit of risk. ZKH Group Limited is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  288.00  in ZKH Group Limited on September 13, 2024 and sell it today you would earn a total of  71.00  from holding ZKH Group Limited or generate 24.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

Bright Scholar Education  vs.  ZKH Group Limited

Bright Scholar Education

Risk-Adjusted Performance

2 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bright Scholar Education are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Bright Scholar is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

ZKH Group Limited

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ZKH Group Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting forward-looking signals, ZKH Group demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bright Scholar and ZKH Group

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

The idea behind Bright Scholar Education and ZKH Group Limited 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.