Correlation Between Prosus and Zhihu
Can any of the company-specific risk be diversified away by investing in both Prosus 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 Prosus and Zhihu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prosus and Zhihu Inc ADR, you can compare the effects of market volatilities on Prosus 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 Prosus with a short position of Zhihu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prosus and Zhihu.
Diversification Opportunities for Prosus and Zhihu
Poor diversification
The 3 months correlation between Prosus and Zhihu is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Prosus 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 Prosus 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 Prosus 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 Prosus i.e., Prosus and Zhihu go up and down completely randomly.
Pair Corralation between Prosus and Zhihu
Assuming the 90 days horizon Prosus is expected to under-perform the Zhihu. But the pink sheet apears to be less risky and, when comparing its historical volatility, Prosus is 2.62 times less risky than Zhihu. The pink sheet trades about -0.22 of its potential returns per unit of risk. The Zhihu Inc ADR is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 369.00 in Zhihu Inc ADR on August 28, 2024 and sell it today you would lose (1.00) from holding Zhihu Inc ADR or give up 0.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prosus vs. Zhihu Inc ADR
Performance |
| Timeline |
| Prosus |
| Zhihu Inc ADR |
Prosus and Zhihu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prosus and Zhihu
The main advantage of trading using opposite Prosus and Zhihu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prosus 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.| Prosus vs. Tencent Holdings | Prosus vs. Autohome | Prosus vs. Arena Group Holdings | Prosus vs. Golden Grail Technology |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
Other Complementary Tools
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum |