Correlation Between Zhihu and Joint Stock

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

Diversification Opportunities for Zhihu and Joint Stock

-0.29

Correlation Coefficient

Zhihu  Joint Stock

Very good diversification

The 3 months correlation between Zhihu and Joint is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Zhihu Inc ADR and Joint Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Joint Stock 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 Joint Stock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Joint Stock has no effect on the direction of Zhihu i.e., Zhihu and Joint Stock go up and down completely randomly.

Pair Corralation between Zhihu and Joint Stock

Allowing for the 90-day total investment horizon Zhihu Inc ADR is expected to under-perform the Joint Stock. In addition to that, Zhihu is 1.66 times more volatile than Joint Stock. It trades about -0.02 of its total potential returns per unit of risk. Joint Stock is currently generating about -0.02 per unit of volatility. If you would invest  10,196  in Joint Stock on October 1, 2024 and sell it today you would lose (525.00) from holding Joint Stock or give up 5.15% of portfolio value over 90 days.

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

Zhihu Inc ADR  vs.  Joint Stock

Zhihu Inc ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhihu Inc ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, Zhihu is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Joint Stock

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Joint Stock has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Joint Stock is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Zhihu and Joint Stock

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

The idea behind Zhihu Inc ADR and Joint Stock 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.