Correlation Between BCN and ZEN

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

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

Diversification Opportunities for BCN and ZEN

0.33

Correlation Coefficient

BCN  ZEN

Weak diversification

The 3 months correlation between BCN and ZEN is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding BCN and ZEN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZEN and BCN 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 BCN are associated (or correlated) with ZEN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZEN has no effect on the direction of BCN i.e., BCN and ZEN go up and down completely randomly.

Pair Corralation between BCN and ZEN

Assuming the 90 days trading horizon BCN is expected to generate 55.85 times more return on investment than ZEN. However, BCN is 55.85 times more volatile than ZEN. It trades about 0.34 of its potential returns per unit of risk. ZEN is currently generating about -0.36 per unit of risk. If you would invest  0.03  in BCN on January 28, 2024 and sell it today you would lose  0.00  from holding BCN or give up 8.57% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

BCN  vs.  ZEN

BCN

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in BCN are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, BCN exhibited solid returns over the last few months and may actually be approaching a breakup point.

ZEN

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ZEN are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, ZEN exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BCN and ZEN

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

The idea behind BCN and ZEN 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 Stocks Directory module to find actively traded stocks across global markets.