Correlation Between Zhihu and Macmahon Holdings

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

Diversification Opportunities for Zhihu and Macmahon Holdings

-0.94

Correlation Coefficient

Zhihu  Macmahon Holdings

Pay attention - limited upside

The 3 months correlation between Zhihu and Macmahon is -0.94. Overlapping area represents the amount of risk that can be diversified away by holding Zhihu Inc ADR and Macmahon Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macmahon Holdings 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 Macmahon Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macmahon Holdings has no effect on the direction of Zhihu i.e., Zhihu and Macmahon Holdings go up and down completely randomly.

Pair Corralation between Zhihu and Macmahon Holdings

Allowing for the 90-day total investment horizon Zhihu Inc ADR is expected to generate 4.06 times more return on investment than Macmahon Holdings. However, Zhihu is 4.06 times more volatile than Macmahon Holdings Limited. It trades about 0.11 of its potential returns per unit of risk. Macmahon Holdings Limited is currently generating about -0.13 per unit of risk. If you would invest  371.00  in Zhihu Inc ADR on December 27, 2024 and sell it today you would earn a total of  112.00  from holding Zhihu Inc ADR or generate 30.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Zhihu Inc ADR  vs.  Macmahon Holdings Limited

Zhihu Inc ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zhihu Inc ADR are ranked lower than 8 (%) 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.

Macmahon Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Macmahon Holdings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's technical indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Zhihu and Macmahon Holdings

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

The idea behind Zhihu Inc ADR and Macmahon Holdings Limited 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.