Correlation Between Stratasys and Zhihu

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

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

Diversification Opportunities for Stratasys and Zhihu

0.26

Correlation Coefficient

Stratasys  Zhihu

Modest diversification

The 3 months correlation between Stratasys and Zhihu is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Stratasys 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 Stratasys 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 Stratasys 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 Stratasys i.e., Stratasys and Zhihu go up and down completely randomly.

Pair Corralation between Stratasys and Zhihu

Given the investment horizon of 90 days Stratasys is expected to generate 1.44 times more return on investment than Zhihu. However, Stratasys is 1.44 times more volatile than Zhihu Inc ADR. It trades about -0.17 of its potential returns per unit of risk. Zhihu Inc ADR is currently generating about -0.32 per unit of risk. If you would invest  1,022  in Stratasys on October 10, 2024 and sell it today you would lose (103.00) from holding Stratasys or give up 10.08% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Stratasys  vs.  Zhihu Inc ADR

Stratasys

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Stratasys are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Stratasys 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 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 Stratasys and Zhihu

The main advantage of trading using opposite Stratasys and Zhihu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stratasys 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 Stratasys 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.