Correlation Between Primerica and Zhihu

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

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

Diversification Opportunities for Primerica and Zhihu

-0.36

Correlation Coefficient

Primerica  Zhihu

Very good diversification

The 3 months correlation between Primerica and Zhihu is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Primerica 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 Primerica 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 Primerica 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 Primerica i.e., Primerica and Zhihu go up and down completely randomly.

Pair Corralation between Primerica and Zhihu

Considering the 90-day investment horizon Primerica is expected to generate 4.73 times less return on investment than Zhihu. But when comparing it to its historical volatility, Primerica is 2.36 times less risky than Zhihu. It trades about 0.01 of its potential returns per unit of risk. Zhihu Inc ADR is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  355.00  in Zhihu Inc ADR on October 6, 2024 and sell it today you would earn a total of  2.00  from holding Zhihu Inc ADR or generate 0.56% return on investment over 90 days.

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

Primerica  vs.  Zhihu Inc ADR

Primerica

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Primerica are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Primerica is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

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 abnormal performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Primerica and Zhihu

The main advantage of trading using opposite Primerica and Zhihu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Primerica 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 Primerica 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.