Correlation Between Zhihu and First Horizon

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

Diversification Opportunities for Zhihu and First Horizon

0.08

Correlation Coefficient

Zhihu  First Horizon

Significant diversification

The 3 months correlation between Zhihu and First is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Zhihu Inc ADR and First Horizon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Horizon 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 First Horizon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Horizon has no effect on the direction of Zhihu i.e., Zhihu and First Horizon go up and down completely randomly.

Pair Corralation between Zhihu and First Horizon

Allowing for the 90-day total investment horizon Zhihu Inc ADR is expected to generate 12.45 times more return on investment than First Horizon. However, Zhihu is 12.45 times more volatile than First Horizon. It trades about 0.08 of its potential returns per unit of risk. First Horizon is currently generating about 0.12 per unit of risk. If you would invest  330.00  in Zhihu Inc ADR on September 13, 2024 and sell it today you would earn a total of  52.00  from holding Zhihu Inc ADR or generate 15.76% return on investment over 90 days.

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

Zhihu Inc ADR  vs.  First Horizon

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.

First Horizon

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Horizon are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, First Horizon is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Zhihu and First Horizon

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

The idea behind Zhihu Inc ADR and First Horizon 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.