Correlation Between Zhihu and Ecolab
Can any of the company-specific risk be diversified away by investing in both Zhihu and Ecolab 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 Ecolab 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 Ecolab Inc, you can compare the effects of market volatilities on Zhihu and Ecolab 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 Ecolab. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhihu and Ecolab.
Diversification Opportunities for Zhihu and Ecolab
Modest diversification
The 3 months correlation between Zhihu and Ecolab is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Zhihu Inc ADR and Ecolab Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecolab Inc 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 Ecolab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecolab Inc has no effect on the direction of Zhihu i.e., Zhihu and Ecolab go up and down completely randomly.
Pair Corralation between Zhihu and Ecolab
Allowing for the 90-day total investment horizon Zhihu Inc ADR is expected to under-perform the Ecolab. In addition to that, Zhihu is 3.46 times more volatile than Ecolab Inc. It trades about -0.01 of its total potential returns per unit of risk. Ecolab Inc is currently generating about 0.09 per unit of volatility. If you would invest 14,708 in Ecolab Inc on September 2, 2024 and sell it today you would earn a total of 10,169 from holding Ecolab Inc or generate 69.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Zhihu Inc ADR vs. Ecolab Inc
Performance |
| Timeline |
| Zhihu Inc ADR |
| Ecolab Inc |
Zhihu and Ecolab Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Zhihu and Ecolab
The main advantage of trading using opposite Zhihu and Ecolab positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zhihu position performs unexpectedly, Ecolab 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 Ecolab will offset losses from the drop in Ecolab's long position.The idea behind Zhihu Inc ADR and Ecolab Inc 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.| Ecolab vs. Linde plc Ordinary | Ecolab vs. Air Products and | Ecolab vs. Aquagold International | Ecolab vs. Thrivent High Yield |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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