Correlation Between Zhihu and Naked Wines
Can any of the company-specific risk be diversified away by investing in both Zhihu and Naked Wines 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 Naked Wines 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 Naked Wines plc, you can compare the effects of market volatilities on Zhihu and Naked Wines 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 Naked Wines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhihu and Naked Wines.
Diversification Opportunities for Zhihu and Naked Wines
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Zhihu and Naked is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Zhihu Inc ADR and Naked Wines plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Naked Wines plc 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 Naked Wines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Naked Wines plc has no effect on the direction of Zhihu i.e., Zhihu and Naked Wines go up and down completely randomly.
Pair Corralation between Zhihu and Naked Wines
Allowing for the 90-day total investment horizon Zhihu Inc ADR is expected to under-perform the Naked Wines. In addition to that, Zhihu is 2.37 times more volatile than Naked Wines plc. It trades about -0.01 of its total potential returns per unit of risk. Naked Wines plc is currently generating about 0.21 per unit of volatility. If you would invest 252.00 in Naked Wines plc on August 29, 2024 and sell it today you would earn a total of 19.00 from holding Naked Wines plc or generate 7.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Zhihu Inc ADR vs. Naked Wines plc
Performance |
| Timeline |
| Zhihu Inc ADR |
| Naked Wines plc |
Zhihu and Naked Wines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Zhihu and Naked Wines
The main advantage of trading using opposite Zhihu and Naked Wines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zhihu position performs unexpectedly, Naked Wines 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 Naked Wines will offset losses from the drop in Naked Wines' long position.The idea behind Zhihu Inc ADR and Naked Wines plc 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.| Naked Wines vs. Diageo PLC ADR | Naked Wines vs. Constellation Brands Class | Naked Wines vs. Morningstar Unconstrained Allocation | Naked Wines vs. SEI Investments |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
Other Complementary Tools
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated |