Correlation Between Liberty Tri and Zhihu

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

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

Diversification Opportunities for Liberty Tri and Zhihu

0.0

Correlation Coefficient

Liberty Tri  Zhihu

Pay attention - limited upside

The 3 months correlation between Liberty and Zhihu is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Tri 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 Liberty Tri 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 Liberty Tri 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 Liberty Tri i.e., Liberty Tri and Zhihu go up and down completely randomly.

Pair Corralation between Liberty Tri and Zhihu

If you would invest  359.00  in Zhihu Inc ADR on November 29, 2024 and sell it today you would earn a total of  181.00  from holding Zhihu Inc ADR or generate 50.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Liberty Tri  vs.  Zhihu Inc ADR

Liberty Tri

Risk-Adjusted Performance

Very Weak

Over the last 90 days Liberty Tri has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Liberty Tri is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Zhihu Inc ADR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zhihu Inc ADR are ranked lower than 15 (%) 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 Liberty Tri and Zhihu

The main advantage of trading using opposite Liberty Tri and Zhihu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Liberty Tri 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 Liberty Tri 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.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.