Correlation Between Zhihu and Distoken Acquisition

Can any of the company-specific risk be diversified away by investing in both Zhihu and Distoken Acquisition 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 Distoken Acquisition 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 Distoken Acquisition, you can compare the effects of market volatilities on Zhihu and Distoken Acquisition 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 Distoken Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhihu and Distoken Acquisition.

Diversification Opportunities for Zhihu and Distoken Acquisition

-0.28

Correlation Coefficient

Zhihu  Distoken Acquisition

Very good diversification

The 3 months correlation between Zhihu and Distoken is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Zhihu Inc ADR and Distoken Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Distoken Acquisition 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 Distoken Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Distoken Acquisition has no effect on the direction of Zhihu i.e., Zhihu and Distoken Acquisition go up and down completely randomly.

Pair Corralation between Zhihu and Distoken Acquisition

Allowing for the 90-day total investment horizon Zhihu Inc ADR is expected to generate 6.35 times more return on investment than Distoken Acquisition. However, Zhihu is 6.35 times more volatile than Distoken Acquisition. It trades about 0.03 of its potential returns per unit of risk. Distoken Acquisition is currently generating about 0.08 per unit of risk. If you would invest  351.00  in Zhihu Inc ADR on October 7, 2024 and sell it today you would earn a total of  6.00  from holding Zhihu Inc ADR or generate 1.71% return on investment over 90 days.

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

Zhihu Inc ADR  vs.  Distoken Acquisition

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 unfluctuating performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Distoken Acquisition

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Distoken Acquisition are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Distoken Acquisition is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Zhihu and Distoken Acquisition

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

The idea behind Zhihu Inc ADR and Distoken Acquisition 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.