Correlation Between Zhihu and Outbrain

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Can any of the company-specific risk be diversified away by investing in both Zhihu and Outbrain 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 Outbrain 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 Outbrain, you can compare the effects of market volatilities on Zhihu and Outbrain 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 Outbrain. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhihu and Outbrain.

Diversification Opportunities for Zhihu and Outbrain

-0.31
  Correlation Coefficient

Very good diversification

The 3 months correlation between Zhihu and Outbrain is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Zhihu Inc ADR and Outbrain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Outbrain 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 Outbrain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Outbrain has no effect on the direction of Zhihu i.e., Zhihu and Outbrain go up and down completely randomly.

Pair Corralation between Zhihu and Outbrain

Allowing for the 90-day total investment horizon Zhihu is expected to generate 2.97 times less return on investment than Outbrain. In addition to that, Zhihu is 1.22 times more volatile than Outbrain. It trades about 0.04 of its total potential returns per unit of risk. Outbrain is currently generating about 0.16 per unit of volatility. If you would invest  453.00  in Outbrain on August 23, 2024 and sell it today you would earn a total of  47.00  from holding Outbrain or generate 10.38% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Zhihu Inc ADR  vs.  Outbrain

 Performance 
       Timeline  
Zhihu Inc ADR 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Zhihu Inc ADR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, Zhihu demonstrated solid returns over the last few months and may actually be approaching a breakup point.
Outbrain 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Outbrain has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Outbrain is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Zhihu and Outbrain Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Zhihu and Outbrain

The main advantage of trading using opposite Zhihu and Outbrain positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zhihu position performs unexpectedly, Outbrain 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 Outbrain will offset losses from the drop in Outbrain's long position.
The idea behind Zhihu Inc ADR and Outbrain 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.
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.

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