Correlation Between Zhihu and Enpro

Can any of the company-specific risk be diversified away by investing in both Zhihu and Enpro 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 Enpro 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 Enpro Industries 575, you can compare the effects of market volatilities on Zhihu and Enpro 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 Enpro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhihu and Enpro.

Diversification Opportunities for Zhihu and Enpro

-0.09

Correlation Coefficient

Zhihu  Enpro

Good diversification

The 3 months correlation between Zhihu and Enpro is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Zhihu Inc ADR and Enpro Industries 575 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enpro Industries 575 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 Enpro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enpro Industries 575 has no effect on the direction of Zhihu i.e., Zhihu and Enpro go up and down completely randomly.

Pair Corralation between Zhihu and Enpro

Allowing for the 90-day total investment horizon Zhihu Inc ADR is expected to under-perform the Enpro. In addition to that, Zhihu is 11.25 times more volatile than Enpro Industries 575. It trades about -0.03 of its total potential returns per unit of risk. Enpro Industries 575 is currently generating about -0.02 per unit of volatility. If you would invest  9,890  in Enpro Industries 575 on September 13, 2024 and sell it today you would lose (141.00) from holding Enpro Industries 575 or give up 1.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	91.94%
Values	Daily Returns

Zhihu Inc ADR  vs.  Enpro Industries 575

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.

Enpro Industries 575

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enpro Industries 575 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Enpro is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Zhihu and Enpro

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

The idea behind Zhihu Inc ADR and Enpro Industries 575 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 Global Correlations module to find global opportunities by holding instruments from different markets.