Correlation Between Zhihu and Service Properties
Can any of the company-specific risk be diversified away by investing in both Zhihu and Service Properties 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 Service Properties 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 Service Properties Trust, you can compare the effects of market volatilities on Zhihu and Service Properties 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 Service Properties. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhihu and Service Properties.
Diversification Opportunities for Zhihu and Service Properties
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Zhihu and Service is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Zhihu Inc ADR and Service Properties Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Service Properties Trust 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 Service Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Service Properties Trust has no effect on the direction of Zhihu i.e., Zhihu and Service Properties go up and down completely randomly.
Pair Corralation between Zhihu and Service Properties
Allowing for the 90-day total investment horizon Zhihu Inc ADR is expected to under-perform the Service Properties. But the stock apears to be less risky and, when comparing its historical volatility, Zhihu Inc ADR is 1.06 times less risky than Service Properties. The stock trades about -0.03 of its potential returns per unit of risk. The Service Properties Trust is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 251.00 in Service Properties Trust on November 4, 2024 and sell it today you would earn a total of 35.00 from holding Service Properties Trust or generate 13.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Zhihu Inc ADR vs. Service Properties Trust
Performance |
| Timeline |
| Zhihu Inc ADR |
| Service Properties Trust |
Zhihu and Service Properties Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Zhihu and Service Properties
The main advantage of trading using opposite Zhihu and Service Properties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zhihu position performs unexpectedly, Service Properties 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 Service Properties will offset losses from the drop in Service Properties' long position.The idea behind Zhihu Inc ADR and Service Properties Trust 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.| Service Properties vs. JetBlue Airways Corp | Service Properties vs. Alaska Air Group | Service Properties vs. Apogee Therapeutics, Common | Service Properties vs. International Consolidated Airlines |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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