Correlation Between Weyco and Zhihu
Can any of the company-specific risk be diversified away by investing in both Weyco 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 Weyco and Zhihu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Weyco Group and Zhihu Inc ADR, you can compare the effects of market volatilities on Weyco 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 Weyco with a short position of Zhihu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Weyco and Zhihu.
Diversification Opportunities for Weyco and Zhihu
Good diversification
The 3 months correlation between Weyco and Zhihu is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Weyco Group 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 Weyco 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 Weyco Group 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 Weyco i.e., Weyco and Zhihu go up and down completely randomly.
Pair Corralation between Weyco and Zhihu
Given the investment horizon of 90 days Weyco Group is expected to generate 0.72 times more return on investment than Zhihu. However, Weyco Group is 1.4 times less risky than Zhihu. It trades about 0.07 of its potential returns per unit of risk. Zhihu Inc ADR is currently generating about 0.03 per unit of risk. If you would invest 2,961 in Weyco Group on August 25, 2024 and sell it today you would earn a total of 684.00 from holding Weyco Group or generate 23.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Weyco Group vs. Zhihu Inc ADR
Performance |
| Timeline |
| Weyco Group |
| Zhihu Inc ADR |
Weyco and Zhihu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Weyco and Zhihu
The main advantage of trading using opposite Weyco and Zhihu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Weyco 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 Weyco Group 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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