Correlation Between Sealed Air and Zhihu
Can any of the company-specific risk be diversified away by investing in both Sealed Air 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 Sealed Air and Zhihu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sealed Air and Zhihu Inc ADR, you can compare the effects of market volatilities on Sealed Air 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 Sealed Air with a short position of Zhihu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sealed Air and Zhihu.
Diversification Opportunities for Sealed Air and Zhihu
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Sealed and Zhihu is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Sealed Air 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 Sealed Air 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 Sealed Air 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 Sealed Air i.e., Sealed Air and Zhihu go up and down completely randomly.
Pair Corralation between Sealed Air and Zhihu
Considering the 90-day investment horizon Sealed Air is expected to generate 0.47 times more return on investment than Zhihu. However, Sealed Air is 2.15 times less risky than Zhihu. It trades about -0.02 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 5,032 in Sealed Air on September 2, 2024 and sell it today you would lose (1,372) from holding Sealed Air or give up 27.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sealed Air vs. Zhihu Inc ADR
Performance |
| Timeline |
| Sealed Air |
| Zhihu Inc ADR |
Sealed Air and Zhihu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sealed Air and Zhihu
The main advantage of trading using opposite Sealed Air and Zhihu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sealed Air 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.| Sealed Air vs. Avery Dennison Corp | Sealed Air vs. International Paper | Sealed Air vs. Sonoco Products | Sealed Air vs. Packaging Corp of |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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