Correlation Between Fast Retailing and Zhihu
Can any of the company-specific risk be diversified away by investing in both Fast Retailing 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 Fast Retailing and Zhihu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fast Retailing Co and Zhihu Inc ADR, you can compare the effects of market volatilities on Fast Retailing 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 Fast Retailing with a short position of Zhihu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fast Retailing and Zhihu.
Diversification Opportunities for Fast Retailing and Zhihu
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Fast and Zhihu is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co 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 Fast Retailing 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 Fast Retailing Co 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 Fast Retailing i.e., Fast Retailing and Zhihu go up and down completely randomly.
Pair Corralation between Fast Retailing and Zhihu
Assuming the 90 days horizon Fast Retailing Co is expected to under-perform the Zhihu. But the pink sheet apears to be less risky and, when comparing its historical volatility, Fast Retailing Co is 3.41 times less risky than Zhihu. The pink sheet trades about -0.12 of its potential returns per unit of risk. The 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 Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fast Retailing Co vs. Zhihu Inc ADR
Performance |
| Timeline |
| Fast Retailing |
| Zhihu Inc ADR |
Fast Retailing and Zhihu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fast Retailing and Zhihu
The main advantage of trading using opposite Fast Retailing and Zhihu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fast Retailing 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.| Fast Retailing vs. Industria de Diseno | Fast Retailing vs. Aritzia | Fast Retailing vs. Shoe Carnival | Fast Retailing vs. Genesco |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
Other Complementary Tools
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. |