Correlation Between Yelp and Zhihu
Can any of the company-specific risk be diversified away by investing in both Yelp 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 Yelp and Zhihu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Yelp Inc and Zhihu Inc ADR, you can compare the effects of market volatilities on Yelp 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 Yelp with a short position of Zhihu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yelp and Zhihu.
Diversification Opportunities for Yelp and Zhihu
Good diversification
The 3 months correlation between Yelp and Zhihu is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Yelp 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 Yelp 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 Yelp 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 Yelp i.e., Yelp and Zhihu go up and down completely randomly.
Pair Corralation between Yelp and Zhihu
Given the investment horizon of 90 days Yelp Inc is expected to generate 0.5 times more return on investment than Zhihu. However, Yelp Inc is 1.99 times less risky than Zhihu. It trades about 0.16 of its potential returns per unit of risk. Zhihu Inc ADR is currently generating about 0.04 per unit of risk. If you would invest 3,337 in Yelp Inc on August 24, 2024 and sell it today you would earn a total of 221.00 from holding Yelp Inc or generate 6.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Yelp Inc vs. Zhihu Inc ADR
Performance |
| Timeline |
| Yelp Inc |
| Zhihu Inc ADR |
Yelp and Zhihu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Yelp and Zhihu
The main advantage of trading using opposite Yelp and Zhihu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yelp 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 Yelp 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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