Correlation Between Zhihu and EverQuote

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

Diversification Opportunities for Zhihu and EverQuote

-0.26

Correlation Coefficient

Zhihu  EverQuote

Very good diversification

The 3 months correlation between Zhihu and EverQuote is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Zhihu Inc ADR and EverQuote Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EverQuote Class A 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 EverQuote. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EverQuote Class A has no effect on the direction of Zhihu i.e., Zhihu and EverQuote go up and down completely randomly.

Pair Corralation between Zhihu and EverQuote

Allowing for the 90-day total investment horizon Zhihu Inc ADR is expected to generate 1.01 times more return on investment than EverQuote. However, Zhihu is 1.01 times more volatile than EverQuote Class A. It trades about 0.11 of its potential returns per unit of risk. EverQuote Class A is currently generating about 0.1 per unit of risk. If you would invest  341.00  in Zhihu Inc ADR on September 4, 2024 and sell it today you would earn a total of  29.00  from holding Zhihu Inc ADR or generate 8.5% 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.  EverQuote Class A

Zhihu Inc ADR

Risk-Adjusted Performance

4 of 100

Insignificant

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.

EverQuote Class A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EverQuote Class A has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Stock's technical and fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Zhihu and EverQuote

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

The idea behind Zhihu Inc ADR and EverQuote Class A 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.