Correlation Between National Beverage and Zhihu
Can any of the company-specific risk be diversified away by investing in both National Beverage 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 National Beverage and Zhihu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Beverage Corp and Zhihu Inc ADR, you can compare the effects of market volatilities on National Beverage 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 National Beverage with a short position of Zhihu. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Beverage and Zhihu.
Diversification Opportunities for National Beverage and Zhihu
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between National and Zhihu is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp 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 National Beverage 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 National Beverage Corp 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 National Beverage i.e., National Beverage and Zhihu go up and down completely randomly.
Pair Corralation between National Beverage and Zhihu
Given the investment horizon of 90 days National Beverage is expected to generate 1.89 times less return on investment than Zhihu. But when comparing it to its historical volatility, National Beverage Corp is 3.27 times less risky than Zhihu. It trades about 0.14 of its potential returns per unit of risk. Zhihu Inc ADR is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 341.00 in Zhihu Inc ADR on September 3, 2024 and sell it today you would earn a total of 18.00 from holding Zhihu Inc ADR or generate 5.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Beverage Corp vs. Zhihu Inc ADR
Performance |
| Timeline |
| National Beverage Corp |
| Zhihu Inc ADR |
National Beverage and Zhihu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Beverage and Zhihu
The main advantage of trading using opposite National Beverage and Zhihu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Beverage 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.| National Beverage vs. Celsius Holdings | National Beverage vs. Monster Beverage Corp | National Beverage vs. Coca Cola Femsa SAB | National Beverage vs. Keurig Dr Pepper |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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