Correlation Between Playstudios and Zhihu

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

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

Diversification Opportunities for Playstudios and Zhihu

0.42

Correlation Coefficient

Playstudios  Zhihu

Very weak diversification

The 3 months correlation between Playstudios and Zhihu is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Playstudios 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 Playstudios 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 Playstudios 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 Playstudios i.e., Playstudios and Zhihu go up and down completely randomly.

Pair Corralation between Playstudios and Zhihu

Given the investment horizon of 90 days Playstudios is expected to under-perform the Zhihu. But the stock apears to be less risky and, when comparing its historical volatility, Playstudios is 1.22 times less risky than Zhihu. The stock trades about -0.04 of its potential returns per unit of risk. The Zhihu Inc ADR is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  906.00  in Zhihu Inc ADR on October 25, 2024 and sell it today you would lose (570.00) from holding Zhihu Inc ADR or give up 62.91% of portfolio value over 90 days.

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

Playstudios  vs.  Zhihu Inc ADR

Playstudios

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Playstudios are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Playstudios unveiled 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 Playstudios and Zhihu

The main advantage of trading using opposite Playstudios and Zhihu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Playstudios 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 Playstudios 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.