Correlation Between Legacy Education and Zhihu
Can any of the company-specific risk be diversified away by investing in both Legacy Education 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 Legacy Education and Zhihu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Legacy Education and Zhihu Inc ADR, you can compare the effects of market volatilities on Legacy Education 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 Legacy Education with a short position of Zhihu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legacy Education and Zhihu.
Diversification Opportunities for Legacy Education and Zhihu
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Legacy and Zhihu is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Legacy Education 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 Legacy Education 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 Legacy Education 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 Legacy Education i.e., Legacy Education and Zhihu go up and down completely randomly.
Pair Corralation between Legacy Education and Zhihu
Given the investment horizon of 90 days Legacy Education is expected to generate 1.48 times more return on investment than Zhihu. However, Legacy Education is 1.48 times more volatile than Zhihu Inc ADR. It trades about 0.41 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 489.00 in Legacy Education on August 29, 2024 and sell it today you would earn a total of 297.00 from holding Legacy Education or generate 60.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legacy Education vs. Zhihu Inc ADR
Performance |
| Timeline |
| Legacy Education |
| Zhihu Inc ADR |
Legacy Education and Zhihu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legacy Education and Zhihu
The main advantage of trading using opposite Legacy Education and Zhihu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legacy Education 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.| Legacy Education vs. Chemours Co | Legacy Education vs. Stepan Company | Legacy Education vs. Pinterest | Legacy Education vs. NETGEAR |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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