Correlation Between GMS and Zhihu

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

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

Diversification Opportunities for GMS and Zhihu

-0.66

Correlation Coefficient

GMS  Zhihu

Excellent diversification

The 3 months correlation between GMS and Zhihu is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc 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 GMS 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 GMS Inc 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 GMS i.e., GMS and Zhihu go up and down completely randomly.

Pair Corralation between GMS and Zhihu

Considering the 90-day investment horizon GMS Inc is expected to under-perform the Zhihu. But the stock apears to be less risky and, when comparing its historical volatility, GMS Inc is 2.79 times less risky than Zhihu. The stock trades about -0.15 of its potential returns per unit of risk. The Zhihu Inc ADR is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  364.00  in Zhihu Inc ADR on December 24, 2024 and sell it today you would earn a total of  97.00  from holding Zhihu Inc ADR or generate 26.65% return on investment over 90 days.

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

GMS Inc  vs.  Zhihu Inc ADR

GMS Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days GMS Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Zhihu Inc ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zhihu Inc ADR are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating technical indicators, Zhihu demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GMS and Zhihu

The main advantage of trading using opposite GMS and Zhihu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GMS 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 GMS Inc 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.