Correlation Between Primoris Services and Zhihu

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

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

Diversification Opportunities for Primoris Services and Zhihu

-0.38

Correlation Coefficient

Primoris Services  Zhihu

Very good diversification

The 3 months correlation between Primoris and Zhihu is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Primoris Services 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 Primoris Services 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 Primoris Services 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 Primoris Services i.e., Primoris Services and Zhihu go up and down completely randomly.

Pair Corralation between Primoris Services and Zhihu

Given the investment horizon of 90 days Primoris Services is expected to generate 1.15 times more return on investment than Zhihu. However, Primoris Services is 1.15 times more volatile than Zhihu Inc ADR. It trades about 0.06 of its potential returns per unit of risk. Zhihu Inc ADR is currently generating about -0.27 per unit of risk. If you would invest  7,850  in Primoris Services on October 8, 2024 and sell it today you would earn a total of  160.00  from holding Primoris Services or generate 2.04% return on investment over 90 days.

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

Primoris Services  vs.  Zhihu Inc ADR

Primoris Services

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Primoris Services are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile forward indicators, Primoris Services displayed 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 latest unfluctuating performance, the Stock's technical indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Primoris Services and Zhihu

The main advantage of trading using opposite Primoris Services and Zhihu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Primoris Services 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 Primoris Services 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.