Correlation Between Boston Beer and Zhihu
Can any of the company-specific risk be diversified away by investing in both Boston Beer 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 Boston Beer and Zhihu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Boston Beer and Zhihu Inc ADR, you can compare the effects of market volatilities on Boston Beer 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 Boston Beer with a short position of Zhihu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boston Beer and Zhihu.
Diversification Opportunities for Boston Beer and Zhihu
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Boston and Zhihu is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Boston Beer 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 Boston Beer 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 Boston Beer 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 Boston Beer i.e., Boston Beer and Zhihu go up and down completely randomly.
Pair Corralation between Boston Beer and Zhihu
Considering the 90-day investment horizon Boston Beer is expected to under-perform the Zhihu. In addition to that, Boston Beer is 1.07 times more volatile than Zhihu Inc ADR. It trades about -0.4 of its total potential returns per unit of risk. Zhihu Inc ADR is currently generating about -0.03 per unit of volatility. If you would invest 354.00 in Zhihu Inc ADR on November 3, 2024 and sell it today you would lose (5.00) from holding Zhihu Inc ADR or give up 1.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Boston Beer vs. Zhihu Inc ADR
Performance |
| Timeline |
| Boston Beer |
| Zhihu Inc ADR |
Boston Beer and Zhihu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Boston Beer and Zhihu
The main advantage of trading using opposite Boston Beer and Zhihu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boston Beer 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.| Boston Beer vs. Anheuser Busch Inbev | Boston Beer vs. Molson Coors Beverage | Boston Beer vs. Heineken NV | Boston Beer vs. Ambev SA ADR |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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