Correlation Between Toro and Zhihu
Can any of the company-specific risk be diversified away by investing in both Toro 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 Toro and Zhihu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Toro Co and Zhihu Inc ADR, you can compare the effects of market volatilities on Toro 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 Toro with a short position of Zhihu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toro and Zhihu.
Diversification Opportunities for Toro and Zhihu
Good diversification
The 3 months correlation between Toro and Zhihu is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Toro Co 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 Toro 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 Toro Co 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 Toro i.e., Toro and Zhihu go up and down completely randomly.
Pair Corralation between Toro and Zhihu
Considering the 90-day investment horizon Toro is expected to generate 1.17 times less return on investment than Zhihu. But when comparing it to its historical volatility, Toro Co is 2.35 times less risky than Zhihu. It trades about 0.2 of its potential returns per unit of risk. Zhihu Inc ADR is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 358.00 in Zhihu Inc ADR on August 31, 2024 and sell it today you would earn a total of 26.00 from holding Zhihu Inc ADR or generate 7.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Toro Co vs. Zhihu Inc ADR
Performance |
| Timeline |
| Toro |
| Zhihu Inc ADR |
Toro and Zhihu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Toro and Zhihu
The main advantage of trading using opposite Toro and Zhihu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toro 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.| Toro vs. AMCON Distributing | Toro vs. Espey Mfg Electronics | Toro vs. Servotronics | Toro vs. CompX International |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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