Correlation Between Zhihu and Lizhi
Can any of the company-specific risk be diversified away by investing in both Zhihu and Lizhi 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 Lizhi 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 Lizhi Inc, you can compare the effects of market volatilities on Zhihu and Lizhi 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 Lizhi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhihu and Lizhi.
Diversification Opportunities for Zhihu and Lizhi
Poor diversification
The 3 months correlation between Zhihu and Lizhi is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Zhihu Inc ADR and Lizhi Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lizhi Inc 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 Lizhi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lizhi Inc has no effect on the direction of Zhihu i.e., Zhihu and Lizhi go up and down completely randomly.
Pair Corralation between Zhihu and Lizhi
Allowing for the 90-day total investment horizon Zhihu Inc ADR is expected to generate 0.77 times more return on investment than Lizhi. However, Zhihu Inc ADR is 1.3 times less risky than Lizhi. It trades about -0.02 of its potential returns per unit of risk. Lizhi Inc is currently generating about -0.03 per unit of risk. If you would invest 810.00 in Zhihu Inc ADR on August 26, 2024 and sell it today you would lose (450.00) from holding Zhihu Inc ADR or give up 55.56% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Zhihu Inc ADR vs. Lizhi Inc
Performance |
| Timeline |
| Zhihu Inc ADR |
| Lizhi Inc |
Zhihu and Lizhi Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Zhihu and Lizhi
The main advantage of trading using opposite Zhihu and Lizhi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zhihu position performs unexpectedly, Lizhi 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 Lizhi will offset losses from the drop in Lizhi's long position.The idea behind Zhihu Inc ADR and Lizhi Inc 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.| Lizhi vs. Parker Hannifin | Lizhi vs. East Africa Metals | Lizhi vs. Uranium Energy Corp | Lizhi vs. Apogee Enterprises |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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