Correlation Between EMCOR and Zhihu

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

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

Diversification Opportunities for EMCOR and Zhihu

-0.11

Correlation Coefficient

EMCOR  Zhihu

Good diversification

The 3 months correlation between EMCOR and Zhihu is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding EMCOR 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 EMCOR 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 EMCOR 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 EMCOR i.e., EMCOR and Zhihu go up and down completely randomly.

Pair Corralation between EMCOR and Zhihu

Considering the 90-day investment horizon EMCOR Group is expected to generate 0.46 times more return on investment than Zhihu. However, EMCOR Group is 2.18 times less risky than Zhihu. It trades about 0.14 of its potential returns per unit of risk. Zhihu Inc ADR is currently generating about -0.03 per unit of risk. If you would invest  14,816  in EMCOR Group on October 23, 2024 and sell it today you would earn a total of  37,479  from holding EMCOR Group or generate 252.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

EMCOR Group  vs.  Zhihu Inc ADR

EMCOR Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EMCOR Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile primary indicators, EMCOR exhibited 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 fairly strong technical indicators, Zhihu is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with EMCOR and Zhihu

The main advantage of trading using opposite EMCOR and Zhihu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EMCOR 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 EMCOR 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.