Correlation Between Forsys Metals and Zhihu

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

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

Diversification Opportunities for Forsys Metals and Zhihu

0.6

Correlation Coefficient

Forsys Metals  Zhihu

Poor diversification

The 3 months correlation between Forsys and Zhihu is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Forsys Metals Corp 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 Forsys Metals 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 Forsys Metals Corp 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 Forsys Metals i.e., Forsys Metals and Zhihu go up and down completely randomly.

Pair Corralation between Forsys Metals and Zhihu

Assuming the 90 days horizon Forsys Metals Corp is expected to under-perform the Zhihu. In addition to that, Forsys Metals is 1.57 times more volatile than Zhihu Inc ADR. It trades about -0.01 of its total potential returns per unit of risk. Zhihu Inc ADR is currently generating about 0.07 per unit of volatility. If you would invest  292.00  in Zhihu Inc ADR on September 16, 2024 and sell it today you would earn a total of  84.00  from holding Zhihu Inc ADR or generate 28.77% return on investment over 90 days.

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

Forsys Metals Corp  vs.  Zhihu Inc ADR

Forsys Metals Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Forsys Metals Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Forsys Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Zhihu Inc ADR

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zhihu Inc ADR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, Zhihu demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Forsys Metals and Zhihu

The main advantage of trading using opposite Forsys Metals and Zhihu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Forsys Metals 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 Forsys Metals Corp 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.

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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .