Correlation Between Zhihu and Space-Communication
Can any of the company-specific risk be diversified away by investing in both Zhihu and Space-Communication 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 Space-Communication 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 Space Communication, you can compare the effects of market volatilities on Zhihu and Space-Communication 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 Space-Communication. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhihu and Space-Communication.
Diversification Opportunities for Zhihu and Space-Communication
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Zhihu and Space-Communication is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Zhihu Inc ADR and Space Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Space Communication 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 Space-Communication. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Space Communication has no effect on the direction of Zhihu i.e., Zhihu and Space-Communication go up and down completely randomly.
Pair Corralation between Zhihu and Space-Communication
Allowing for the 90-day total investment horizon Zhihu Inc ADR is expected to generate 1.12 times more return on investment than Space-Communication. However, Zhihu is 1.12 times more volatile than Space Communication. It trades about -0.01 of its potential returns per unit of risk. Space Communication is currently generating about -0.04 per unit of risk. If you would invest 756.00 in Zhihu Inc ADR on September 2, 2024 and sell it today you would lose (397.00) from holding Zhihu Inc ADR or give up 52.51% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Zhihu Inc ADR vs. Space Communication
Performance |
| Timeline |
| Zhihu Inc ADR |
| Space Communication |
Zhihu and Space-Communication Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Zhihu and Space-Communication
The main advantage of trading using opposite Zhihu and Space-Communication positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zhihu position performs unexpectedly, Space-Communication 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 Space-Communication will offset losses from the drop in Space-Communication's long position.The idea behind Zhihu Inc ADR and Space Communication 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.| Space-Communication vs. The Coca Cola | Space-Communication vs. Boston Beer | Space-Communication vs. Molson Coors Brewing | Space-Communication vs. Biglari Holdings |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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