Correlation Between Zhihu and Ubisoft Entertainment
Can any of the company-specific risk be diversified away by investing in both Zhihu and Ubisoft Entertainment 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 Ubisoft Entertainment 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 Ubisoft Entertainment, you can compare the effects of market volatilities on Zhihu and Ubisoft Entertainment 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 Ubisoft Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhihu and Ubisoft Entertainment.
Diversification Opportunities for Zhihu and Ubisoft Entertainment
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Zhihu and Ubisoft is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Zhihu Inc ADR and Ubisoft Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ubisoft Entertainment 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 Ubisoft Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ubisoft Entertainment has no effect on the direction of Zhihu i.e., Zhihu and Ubisoft Entertainment go up and down completely randomly.
Pair Corralation between Zhihu and Ubisoft Entertainment
Allowing for the 90-day total investment horizon Zhihu Inc ADR is expected to under-perform the Ubisoft Entertainment. But the stock apears to be less risky and, when comparing its historical volatility, Zhihu Inc ADR is 1.53 times less risky than Ubisoft Entertainment. The stock trades about -0.22 of its potential returns per unit of risk. The Ubisoft Entertainment is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest 1,300 in Ubisoft Entertainment on October 20, 2024 and sell it today you would lose (73.00) from holding Ubisoft Entertainment or give up 5.62% 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. Ubisoft Entertainment
Performance |
| Timeline |
| Zhihu Inc ADR |
| Ubisoft Entertainment |
Zhihu and Ubisoft Entertainment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Zhihu and Ubisoft Entertainment
The main advantage of trading using opposite Zhihu and Ubisoft Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zhihu position performs unexpectedly, Ubisoft Entertainment 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 Ubisoft Entertainment will offset losses from the drop in Ubisoft Entertainment's long position.The idea behind Zhihu Inc ADR and Ubisoft Entertainment 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.| Ubisoft Entertainment vs. Capcom Co Ltd | Ubisoft Entertainment vs. CD Projekt SA | Ubisoft Entertainment vs. Sega Sammy Holdings | Ubisoft Entertainment vs. Playtika Holding Corp |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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