Correlation Between Zhihu and Alvotech
Can any of the company-specific risk be diversified away by investing in both Zhihu and Alvotech 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 Zhihu and Alvotech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Zhihu Inc ADR and Alvotech, you can compare the effects of market volatilities on Zhihu and Alvotech 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 Zhihu with a short position of Alvotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhihu and Alvotech.
Diversification Opportunities for Zhihu and Alvotech
Very weak diversification
The 3 months correlation between Zhihu and Alvotech is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Zhihu Inc ADR and Alvotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alvotech and Zhihu 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 Zhihu Inc ADR are associated (or correlated) with Alvotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alvotech has no effect on the direction of Zhihu i.e., Zhihu and Alvotech go up and down completely randomly.
Pair Corralation between Zhihu and Alvotech
Allowing for the 90-day total investment horizon Zhihu Inc ADR is expected to generate 2.38 times more return on investment than Alvotech. However, Zhihu is 2.38 times more volatile than Alvotech. It trades about 0.02 of its potential returns per unit of risk. Alvotech is currently generating about -0.2 per unit of risk. If you would invest 358.00 in Zhihu Inc ADR on August 31, 2024 and sell it today you would earn a total of 1.00 from holding Zhihu Inc ADR or generate 0.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Zhihu Inc ADR vs. Alvotech
Performance |
| Timeline |
| Zhihu Inc ADR |
| Alvotech |
Zhihu and Alvotech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Zhihu and Alvotech
The main advantage of trading using opposite Zhihu and Alvotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zhihu position performs unexpectedly, Alvotech 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 Alvotech will offset losses from the drop in Alvotech's long position.The idea behind Zhihu Inc ADR and Alvotech 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments |