Correlation Between Everus Construction and Zhihu

Can any of the company-specific risk be diversified away by investing in both Everus Construction and Zhihu 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 Everus Construction and Zhihu into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Everus Construction Group and Zhihu Inc ADR, you can compare the effects of market volatilities on Everus Construction and Zhihu 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 Everus Construction with a short position of Zhihu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Everus Construction and Zhihu.

Diversification Opportunities for Everus Construction and Zhihu

0.36

Correlation Coefficient

Everus Construction  Zhihu

Weak diversification

The 3 months correlation between Everus and Zhihu is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Everus Construction Group and Zhihu Inc ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhihu Inc ADR and Everus Construction 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 Everus Construction Group are associated (or correlated) with Zhihu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhihu Inc ADR has no effect on the direction of Everus Construction i.e., Everus Construction and Zhihu go up and down completely randomly.

Pair Corralation between Everus Construction and Zhihu

Considering the 90-day investment horizon Everus Construction Group is expected to generate 1.71 times more return on investment than Zhihu. However, Everus Construction is 1.71 times more volatile than Zhihu Inc ADR. It trades about 0.07 of its potential returns per unit of risk. Zhihu Inc ADR is currently generating about -0.27 per unit of risk. If you would invest  6,695  in Everus Construction Group on October 8, 2024 and sell it today you would earn a total of  209.00  from holding Everus Construction Group or generate 3.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Everus Construction Group  vs.  Zhihu Inc ADR

Everus Construction

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Everus Construction Group are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady fundamental indicators, Everus Construction reported solid returns over the last few months and may actually be approaching a breakup point.

Zhihu Inc ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhihu Inc ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's technical indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Everus Construction and Zhihu

The main advantage of trading using opposite Everus Construction and Zhihu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Everus Construction position performs unexpectedly, Zhihu 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 Zhihu will offset losses from the drop in Zhihu's long position.

The idea behind Everus Construction Group and Zhihu Inc ADR 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.

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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.