Correlation Between Zhihu and Fast Retailing
Can any of the company-specific risk be diversified away by investing in both Zhihu and Fast Retailing 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 Fast Retailing 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 Fast Retailing Co, you can compare the effects of market volatilities on Zhihu and Fast Retailing 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 Fast Retailing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhihu and Fast Retailing.
Diversification Opportunities for Zhihu and Fast Retailing
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Zhihu and Fast is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Zhihu Inc ADR and Fast Retailing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fast Retailing 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 Fast Retailing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fast Retailing has no effect on the direction of Zhihu i.e., Zhihu and Fast Retailing go up and down completely randomly.
Pair Corralation between Zhihu and Fast Retailing
Allowing for the 90-day total investment horizon Zhihu Inc ADR is expected to generate 3.5 times more return on investment than Fast Retailing. However, Zhihu is 3.5 times more volatile than Fast Retailing Co. It trades about 0.03 of its potential returns per unit of risk. Fast Retailing Co is currently generating about -0.11 per unit of risk. If you would invest 357.00 in Zhihu Inc ADR on September 1, 2024 and sell it today you would earn a total of 2.00 from holding Zhihu Inc ADR or generate 0.56% 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. Fast Retailing Co
Performance |
| Timeline |
| Zhihu Inc ADR |
| Fast Retailing |
Zhihu and Fast Retailing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Zhihu and Fast Retailing
The main advantage of trading using opposite Zhihu and Fast Retailing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zhihu position performs unexpectedly, Fast Retailing 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 Fast Retailing will offset losses from the drop in Fast Retailing's long position.| Zhihu vs. Tencent Music Entertainment | Zhihu vs. Weibo Corp | Zhihu vs. DouYu International Holdings | Zhihu vs. Baidu Inc |
| Fast Retailing vs. Industria de Diseno | Fast Retailing vs. Aritzia | Fast Retailing vs. Shoe Carnival | Fast Retailing vs. Genesco |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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