Correlation Between Sonos and Zhihu
Can any of the company-specific risk be diversified away by investing in both Sonos 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 Sonos and Zhihu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sonos Inc and Zhihu Inc ADR, you can compare the effects of market volatilities on Sonos 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 Sonos with a short position of Zhihu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sonos and Zhihu.
Diversification Opportunities for Sonos and Zhihu
Good diversification
The 3 months correlation between Sonos and Zhihu is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Sonos Inc 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 Sonos 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 Sonos Inc 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 Sonos i.e., Sonos and Zhihu go up and down completely randomly.
Pair Corralation between Sonos and Zhihu
Given the investment horizon of 90 days Sonos Inc is expected to under-perform the Zhihu. But the stock apears to be less risky and, when comparing its historical volatility, Sonos Inc is 1.63 times less risky than Zhihu. The stock trades about -0.06 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 428.00 in Zhihu Inc ADR on September 3, 2024 and sell it today you would lose (69.00) from holding Zhihu Inc ADR or give up 16.12% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sonos Inc vs. Zhihu Inc ADR
Performance |
| Timeline |
| Sonos Inc |
| Zhihu Inc ADR |
Sonos and Zhihu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sonos and Zhihu
The main advantage of trading using opposite Sonos and Zhihu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sonos 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.The idea behind Sonos Inc and Zhihu Inc ADR pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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