Correlation Between Zhihu and Titan Machinery
Can any of the company-specific risk be diversified away by investing in both Zhihu and Titan Machinery 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 Titan Machinery 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 Titan Machinery, you can compare the effects of market volatilities on Zhihu and Titan Machinery 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 Titan Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhihu and Titan Machinery.
Diversification Opportunities for Zhihu and Titan Machinery
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Zhihu and Titan is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Zhihu Inc ADR and Titan Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Titan Machinery 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 Titan Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Titan Machinery has no effect on the direction of Zhihu i.e., Zhihu and Titan Machinery go up and down completely randomly.
Pair Corralation between Zhihu and Titan Machinery
Allowing for the 90-day total investment horizon Zhihu Inc ADR is expected to generate 1.28 times more return on investment than Titan Machinery. However, Zhihu is 1.28 times more volatile than Titan Machinery. It trades about -0.01 of its potential returns per unit of risk. Titan Machinery is currently generating about -0.07 per unit of risk. If you would invest 428.00 in Zhihu Inc ADR on September 3, 2024 and sell it today you would lose (69.00) from holding Zhihu Inc ADR or give up 16.12% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Zhihu Inc ADR vs. Titan Machinery
Performance |
| Timeline |
| Zhihu Inc ADR |
| Titan Machinery |
Zhihu and Titan Machinery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Zhihu and Titan Machinery
The main advantage of trading using opposite Zhihu and Titan Machinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zhihu position performs unexpectedly, Titan Machinery 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 Titan Machinery will offset losses from the drop in Titan Machinery's long position.The idea behind Zhihu Inc ADR and Titan Machinery 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.| Titan Machinery vs. DXP Enterprises | Titan Machinery vs. Watsco Inc | Titan Machinery vs. Distribution Solutions Group | Titan Machinery vs. SiteOne Landscape Supply |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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