Correlation Between Lipocine and Zhihu

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

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

Diversification Opportunities for Lipocine and Zhihu

0.08

Correlation Coefficient

Lipocine  Zhihu

Significant diversification

The 3 months correlation between Lipocine and Zhihu is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Lipocine 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 Lipocine 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 Lipocine 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 Lipocine i.e., Lipocine and Zhihu go up and down completely randomly.

Pair Corralation between Lipocine and Zhihu

Given the investment horizon of 90 days Lipocine is expected to under-perform the Zhihu. In addition to that, Lipocine is 1.91 times more volatile than Zhihu Inc ADR. It trades about -0.1 of its total potential returns per unit of risk. Zhihu Inc ADR is currently generating about -0.17 per unit of volatility. If you would invest  364.00  in Zhihu Inc ADR on October 24, 2024 and sell it today you would lose (24.00) from holding Zhihu Inc ADR or give up 6.59% of portfolio value over 90 days.

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

Lipocine  vs.  Zhihu Inc ADR

Lipocine

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lipocine has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

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 Lipocine and Zhihu

The main advantage of trading using opposite Lipocine and Zhihu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lipocine 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 Lipocine 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.