Correlation Between China Tontine and Zhihu
Can any of the company-specific risk be diversified away by investing in both China Tontine 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 China Tontine and Zhihu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Tontine Wines and Zhihu Inc ADR, you can compare the effects of market volatilities on China Tontine 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 China Tontine with a short position of Zhihu. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Tontine and Zhihu.
Diversification Opportunities for China Tontine and Zhihu
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between China and Zhihu is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding China Tontine Wines 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 China Tontine 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 China Tontine Wines 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 China Tontine i.e., China Tontine and Zhihu go up and down completely randomly.
Pair Corralation between China Tontine and Zhihu
Assuming the 90 days horizon China Tontine Wines is expected to generate 23.01 times more return on investment than Zhihu. However, China Tontine is 23.01 times more volatile than Zhihu Inc ADR. It trades about 0.1 of its potential returns per unit of risk. Zhihu Inc ADR is currently generating about -0.01 per unit of risk. If you would invest 0.20 in China Tontine Wines on September 3, 2024 and sell it today you would earn a total of 6.90 from holding China Tontine Wines or generate 3450.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 99.39% |
| Values | Daily Returns |
China Tontine Wines vs. Zhihu Inc ADR
Performance |
| Timeline |
| China Tontine Wines |
| Zhihu Inc ADR |
China Tontine and Zhihu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Tontine and Zhihu
The main advantage of trading using opposite China Tontine and Zhihu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Tontine 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.| China Tontine vs. Diageo plc | China Tontine vs. Diageo PLC ADR | China Tontine vs. Pernod Ricard SA | China Tontine vs. Constellation Brands Class |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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