Correlation Between Zhihu and Citizens Financial

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

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

Diversification Opportunities for Zhihu and Citizens Financial

0.05

Correlation Coefficient

Zhihu  Citizens Financial

Significant diversification

The 3 months correlation between Zhihu and Citizens is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Zhihu Inc ADR and Citizens Financial Group, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citizens Financial Group, and Zhihu 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 Zhihu Inc ADR are associated (or correlated) with Citizens Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citizens Financial Group, has no effect on the direction of Zhihu i.e., Zhihu and Citizens Financial go up and down completely randomly.

Pair Corralation between Zhihu and Citizens Financial

Allowing for the 90-day total investment horizon Zhihu Inc ADR is expected to under-perform the Citizens Financial. In addition to that, Zhihu is 4.27 times more volatile than Citizens Financial Group,. It trades about -0.01 of its total potential returns per unit of risk. Citizens Financial Group, is currently generating about 0.01 per unit of volatility. If you would invest  2,664  in Citizens Financial Group, on October 24, 2024 and sell it today you would earn a total of  13.00  from holding Citizens Financial Group, or generate 0.49% return on investment over 90 days.

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

Zhihu Inc ADR  vs.  Citizens Financial Group,

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.

Citizens Financial Group,

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citizens Financial Group, are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical and fundamental indicators, Citizens Financial is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Zhihu and Citizens Financial

The main advantage of trading using opposite Zhihu and Citizens Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zhihu position performs unexpectedly, Citizens Financial 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 Citizens Financial will offset losses from the drop in Citizens Financial's long position.

The idea behind Zhihu Inc ADR and Citizens Financial Group, 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.