Correlation Between NESNVX and Zhihu

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

By analyzing existing cross correlation between NESNVX 4125 01 OCT 27 and Zhihu Inc ADR, you can compare the effects of market volatilities on NESNVX 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 NESNVX with a short position of Zhihu. Check out your portfolio center. Please also check ongoing floating volatility patterns of NESNVX and Zhihu.

Diversification Opportunities for NESNVX and Zhihu

-0.52

Correlation Coefficient

NESNVX  Zhihu

Excellent diversification

The 3 months correlation between NESNVX and Zhihu is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding NESNVX 4125 01 OCT 27 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 NESNVX 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 NESNVX 4125 01 OCT 27 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 NESNVX i.e., NESNVX and Zhihu go up and down completely randomly.

Pair Corralation between NESNVX and Zhihu

Assuming the 90 days trading horizon NESNVX 4125 01 OCT 27 is expected to generate 0.13 times more return on investment than Zhihu. However, NESNVX 4125 01 OCT 27 is 7.72 times less risky than Zhihu. It trades about 0.03 of its potential returns per unit of risk. Zhihu Inc ADR is currently generating about -0.01 per unit of risk. If you would invest  9,697  in NESNVX 4125 01 OCT 27 on October 8, 2024 and sell it today you would earn a total of  98.00  from holding NESNVX 4125 01 OCT 27 or generate 1.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	41.71%
Values	Daily Returns

NESNVX 4125 01 OCT 27  vs.  Zhihu Inc ADR

NESNVX 4125 01

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NESNVX 4125 01 OCT 27 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, NESNVX is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

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 NESNVX and Zhihu

The main advantage of trading using opposite NESNVX and Zhihu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NESNVX 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 NESNVX 4125 01 OCT 27 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.