Correlation Between Zhihu and Cyclo Therapeutics
Can any of the company-specific risk be diversified away by investing in both Zhihu and Cyclo Therapeutics 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 Cyclo Therapeutics 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 Cyclo Therapeutics, you can compare the effects of market volatilities on Zhihu and Cyclo Therapeutics 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 Cyclo Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhihu and Cyclo Therapeutics.
Diversification Opportunities for Zhihu and Cyclo Therapeutics
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Zhihu and Cyclo is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Zhihu Inc ADR and Cyclo Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cyclo Therapeutics 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 Cyclo Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cyclo Therapeutics has no effect on the direction of Zhihu i.e., Zhihu and Cyclo Therapeutics go up and down completely randomly.
Pair Corralation between Zhihu and Cyclo Therapeutics
Allowing for the 90-day total investment horizon Zhihu Inc ADR is expected to generate 0.22 times more return on investment than Cyclo Therapeutics. However, Zhihu Inc ADR is 4.45 times less risky than Cyclo Therapeutics. It trades about 0.12 of its potential returns per unit of risk. Cyclo Therapeutics is currently generating about -0.06 per unit of risk. If you would invest 341.00 in Zhihu Inc ADR on September 5, 2024 and sell it today you would earn a total of 35.00 from holding Zhihu Inc ADR or generate 10.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Zhihu Inc ADR vs. Cyclo Therapeutics
Performance |
| Timeline |
| Zhihu Inc ADR |
| Cyclo Therapeutics |
Zhihu and Cyclo Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Zhihu and Cyclo Therapeutics
The main advantage of trading using opposite Zhihu and Cyclo Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zhihu position performs unexpectedly, Cyclo Therapeutics 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 Cyclo Therapeutics will offset losses from the drop in Cyclo Therapeutics' long position.The idea behind Zhihu Inc ADR and Cyclo Therapeutics 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.| Cyclo Therapeutics vs. Zhihu Inc ADR | Cyclo Therapeutics vs. Iridium Communications | Cyclo Therapeutics vs. Univest Pennsylvania | Cyclo Therapeutics vs. Sphere Entertainment Co |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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