Correlation Between Zhihu and Data#3

Can any of the company-specific risk be diversified away by investing in both Zhihu and Data#3 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 Data#3 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 Data3 Limited, you can compare the effects of market volatilities on Zhihu and Data#3 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 Data#3. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhihu and Data#3.

Diversification Opportunities for Zhihu and Data#3

0.44

Correlation Coefficient

Zhihu  Data#3

Very weak diversification

The 3 months correlation between Zhihu and Data#3 is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Zhihu Inc ADR and Data3 Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Data3 Limited 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 Data#3. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Data3 Limited has no effect on the direction of Zhihu i.e., Zhihu and Data#3 go up and down completely randomly.

Pair Corralation between Zhihu and Data#3

Allowing for the 90-day total investment horizon Zhihu Inc ADR is expected to generate 8.85 times more return on investment than Data#3. However, Zhihu is 8.85 times more volatile than Data3 Limited. It trades about 0.07 of its potential returns per unit of risk. Data3 Limited is currently generating about 0.18 per unit of risk. If you would invest  331.00  in Zhihu Inc ADR on August 30, 2024 and sell it today you would earn a total of  53.00  from holding Zhihu Inc ADR or generate 16.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Zhihu Inc ADR  vs.  Data3 Limited

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 unfluctuating technical indicators, Zhihu demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Data3 Limited

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Data3 Limited are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Data#3 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Zhihu and Data#3

The main advantage of trading using opposite Zhihu and Data#3 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zhihu position performs unexpectedly, Data#3 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 Data#3 will offset losses from the drop in Data#3's long position.

The idea behind Zhihu Inc ADR and Data3 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.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.