Correlation Between Zhihu and LiveOne
Can any of the company-specific risk be diversified away by investing in both Zhihu and LiveOne 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 LiveOne 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 LiveOne, you can compare the effects of market volatilities on Zhihu and LiveOne 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 LiveOne. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhihu and LiveOne.
Diversification Opportunities for Zhihu and LiveOne
Excellent diversification
The 3 months correlation between Zhihu and LiveOne is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Zhihu Inc ADR and LiveOne in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LiveOne 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 LiveOne. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LiveOne has no effect on the direction of Zhihu i.e., Zhihu and LiveOne go up and down completely randomly.
Pair Corralation between Zhihu and LiveOne
Allowing for the 90-day total investment horizon Zhihu Inc ADR is expected to under-perform the LiveOne. But the stock apears to be less risky and, when comparing its historical volatility, Zhihu Inc ADR is 1.39 times less risky than LiveOne. The stock trades about -0.03 of its potential returns per unit of risk. The LiveOne is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 169.00 in LiveOne on August 28, 2024 and sell it today you would lose (78.00) from holding LiveOne or give up 46.15% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Zhihu Inc ADR vs. LiveOne
Performance |
| Timeline |
| Zhihu Inc ADR |
| LiveOne |
Zhihu and LiveOne Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Zhihu and LiveOne
The main advantage of trading using opposite Zhihu and LiveOne positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zhihu position performs unexpectedly, LiveOne 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 LiveOne will offset losses from the drop in LiveOne's long position.The idea behind Zhihu Inc ADR and LiveOne 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.| LiveOne vs. Reading International B | LiveOne vs. Marcus | LiveOne vs. Reading International | LiveOne vs. News Corp B |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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