Correlation Between Willamette Valley and Zhihu

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

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

Diversification Opportunities for Willamette Valley and Zhihu

-0.05

Correlation Coefficient

Willamette Valley  Zhihu

Good diversification

The 3 months correlation between Willamette and Zhihu is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Willamette Valley Vineyards 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 Willamette Valley 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 Willamette Valley Vineyards 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 Willamette Valley i.e., Willamette Valley and Zhihu go up and down completely randomly.

Pair Corralation between Willamette Valley and Zhihu

Given the investment horizon of 90 days Willamette Valley Vineyards is expected to under-perform the Zhihu. But the stock apears to be less risky and, when comparing its historical volatility, Willamette Valley Vineyards is 2.3 times less risky than Zhihu. The stock trades about -0.05 of its potential returns per unit of risk. The Zhihu Inc ADR is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  780.00  in Zhihu Inc ADR on September 20, 2024 and sell it today you would lose (417.00) from holding Zhihu Inc ADR or give up 53.46% of portfolio value over 90 days.

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

Willamette Valley Vineyards  vs.  Zhihu Inc ADR

Willamette Valley

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Willamette Valley Vineyards has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Zhihu Inc ADR

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zhihu Inc ADR are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating technical indicators, Zhihu demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Willamette Valley and Zhihu

The main advantage of trading using opposite Willamette Valley and Zhihu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Willamette Valley 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 Willamette Valley Vineyards 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.