Correlation Between Farmhouse and Zhihu
Can any of the company-specific risk be diversified away by investing in both Farmhouse 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 Farmhouse and Zhihu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Farmhouse and Zhihu Inc ADR, you can compare the effects of market volatilities on Farmhouse 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 Farmhouse with a short position of Zhihu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Farmhouse and Zhihu.
Diversification Opportunities for Farmhouse and Zhihu
Very good diversification
The 3 months correlation between Farmhouse and Zhihu is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Farmhouse 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 Farmhouse 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 Farmhouse 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 Farmhouse i.e., Farmhouse and Zhihu go up and down completely randomly.
Pair Corralation between Farmhouse and Zhihu
Given the investment horizon of 90 days Farmhouse is expected to generate 8.15 times more return on investment than Zhihu. However, Farmhouse is 8.15 times more volatile than Zhihu Inc ADR. It trades about 0.11 of its potential returns per unit of risk. Zhihu Inc ADR is currently generating about -0.03 per unit of risk. If you would invest 6.09 in Farmhouse on August 26, 2024 and sell it today you would earn a total of 8.91 from holding Farmhouse or generate 146.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Farmhouse vs. Zhihu Inc ADR
Performance |
| Timeline |
| Farmhouse |
| Zhihu Inc ADR |
Farmhouse and Zhihu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Farmhouse and Zhihu
The main advantage of trading using opposite Farmhouse and Zhihu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farmhouse 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.| Farmhouse vs. Tencent Holdings | Farmhouse vs. Trivago NV | Farmhouse vs. YY Inc Class | Farmhouse vs. DouYu International Holdings |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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