Correlation Between Zhihu and Investec

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

Diversification Opportunities for Zhihu and Investec

-0.03

Correlation Coefficient

Zhihu  Investec

Good diversification

The 3 months correlation between Zhihu and Investec is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Zhihu Inc ADR and Investec Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investec 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 Investec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investec Group has no effect on the direction of Zhihu i.e., Zhihu and Investec go up and down completely randomly.

Pair Corralation between Zhihu and Investec

Allowing for the 90-day total investment horizon Zhihu Inc ADR is expected to under-perform the Investec. In addition to that, Zhihu is 11.24 times more volatile than Investec Group. It trades about -0.03 of its total potential returns per unit of risk. Investec Group is currently generating about 0.09 per unit of volatility. If you would invest  939.00  in Investec Group on September 26, 2024 and sell it today you would earn a total of  165.00  from holding Investec Group or generate 17.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Zhihu Inc ADR  vs.  Investec Group

Zhihu Inc ADR

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Zhihu Inc ADR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating technical indicators, Zhihu may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Investec Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Investec Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong forward-looking indicators, Investec is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Zhihu and Investec

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

The idea behind Zhihu Inc ADR and Investec 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.