Correlation Between RBACN and Zhihu

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

By analyzing existing cross correlation between RBACN 775 15 MAR 31 and Zhihu Inc ADR, you can compare the effects of market volatilities on RBACN 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 RBACN with a short position of Zhihu. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBACN and Zhihu.

Diversification Opportunities for RBACN and Zhihu

0.45

Correlation Coefficient

RBACN  Zhihu

Very weak diversification

The 3 months correlation between RBACN and Zhihu is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding RBACN 775 15 MAR 31 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 RBACN 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 RBACN 775 15 MAR 31 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 RBACN i.e., RBACN and Zhihu go up and down completely randomly.

Pair Corralation between RBACN and Zhihu

Assuming the 90 days trading horizon RBACN 775 15 MAR 31 is expected to generate 0.11 times more return on investment than Zhihu. However, RBACN 775 15 MAR 31 is 9.21 times less risky than Zhihu. It trades about 0.02 of its potential returns per unit of risk. Zhihu Inc ADR is currently generating about -0.03 per unit of risk. If you would invest  10,150  in RBACN 775 15 MAR 31 on September 28, 2024 and sell it today you would earn a total of  313.00  from holding RBACN 775 15 MAR 31 or generate 3.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	86.9%
Values	Daily Returns

RBACN 775 15 MAR 31  vs.  Zhihu Inc ADR

RBACN 775 15

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RBACN 775 15 MAR 31 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, RBACN is not utilizing all of its potentials. The recent 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 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 RBACN and Zhihu

The main advantage of trading using opposite RBACN and Zhihu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RBACN 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 RBACN 775 15 MAR 31 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.