Correlation Between NL Industries and Zhihu
Can any of the company-specific risk be diversified away by investing in both NL Industries 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 NL Industries and Zhihu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NL Industries and Zhihu Inc ADR, you can compare the effects of market volatilities on NL Industries 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 NL Industries with a short position of Zhihu. Check out your portfolio center. Please also check ongoing floating volatility patterns of NL Industries and Zhihu.
Diversification Opportunities for NL Industries and Zhihu
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between NL Industries and Zhihu is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding NL Industries 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 NL Industries 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 NL Industries 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 NL Industries i.e., NL Industries and Zhihu go up and down completely randomly.
Pair Corralation between NL Industries and Zhihu
Allowing for the 90-day total investment horizon NL Industries is expected to under-perform the Zhihu. But the stock apears to be less risky and, when comparing its historical volatility, NL Industries is 1.96 times less risky than Zhihu. The stock trades about -0.02 of its potential returns per unit of risk. The Zhihu Inc ADR is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 334.00 in Zhihu Inc ADR on September 12, 2024 and sell it today you would earn a total of 55.00 from holding Zhihu Inc ADR or generate 16.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NL Industries vs. Zhihu Inc ADR
Performance |
| Timeline |
| NL Industries |
| Zhihu Inc ADR |
NL Industries and Zhihu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NL Industries and Zhihu
The main advantage of trading using opposite NL Industries and Zhihu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NL Industries 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.| NL Industries vs. Brinks Company | NL Industries vs. Allegion PLC | NL Industries vs. Resideo Technologies | NL Industries vs. Mistras Group |
| Zhihu vs. Twilio Inc | Zhihu vs. Meta Platforms | Zhihu vs. Alphabet Inc Class C | Zhihu vs. Alphabet Inc Class A |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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