Correlation Between Zhihu and NL Industries
Can any of the company-specific risk be diversified away by investing in both Zhihu and NL Industries 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 NL Industries 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 NL Industries, you can compare the effects of market volatilities on Zhihu and NL Industries 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 NL Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhihu and NL Industries.
Diversification Opportunities for Zhihu and NL Industries
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Zhihu and NL Industries is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Zhihu Inc ADR and NL Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NL Industries 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 NL Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NL Industries has no effect on the direction of Zhihu i.e., Zhihu and NL Industries go up and down completely randomly.
Pair Corralation between Zhihu and NL Industries
Allowing for the 90-day total investment horizon Zhihu Inc ADR is expected to generate 1.96 times more return on investment than NL Industries. However, Zhihu is 1.96 times more volatile than NL Industries. It trades about 0.19 of its potential returns per unit of risk. NL Industries is currently generating about -0.02 per unit of risk. If you would invest 334.00 in Zhihu Inc ADR on September 12, 2024 and sell it today you would earn a total of 55.00 from holding Zhihu Inc ADR or generate 16.47% 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. NL Industries
Performance |
| Timeline |
| Zhihu Inc ADR |
| NL Industries |
Zhihu and NL Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Zhihu and NL Industries
The main advantage of trading using opposite Zhihu and NL Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zhihu position performs unexpectedly, NL Industries 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 NL Industries will offset losses from the drop in NL Industries' long position.| Zhihu vs. Twilio Inc | Zhihu vs. Meta Platforms | Zhihu vs. Alphabet Inc Class C | Zhihu vs. Alphabet Inc Class A |
| NL Industries vs. Brinks Company | NL Industries vs. Allegion PLC | NL Industries vs. Resideo Technologies | NL Industries vs. Mistras Group |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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