Correlation Between Zhihu and Everspin Technologies

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

Diversification Opportunities for Zhihu and Everspin Technologies

0.09

Correlation Coefficient

Zhihu  Everspin Technologies

Significant diversification

The 3 months correlation between Zhihu and Everspin is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Zhihu Inc ADR and Everspin Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Everspin Technologies 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 Everspin Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Everspin Technologies has no effect on the direction of Zhihu i.e., Zhihu and Everspin Technologies go up and down completely randomly.

Pair Corralation between Zhihu and Everspin Technologies

Allowing for the 90-day total investment horizon Zhihu is expected to generate 2.2 times less return on investment than Everspin Technologies. In addition to that, Zhihu is 1.27 times more volatile than Everspin Technologies. It trades about 0.04 of its total potential returns per unit of risk. Everspin Technologies is currently generating about 0.11 per unit of volatility. If you would invest  594.00  in Everspin Technologies on September 20, 2024 and sell it today you would earn a total of  29.00  from holding Everspin Technologies or generate 4.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Zhihu Inc ADR  vs.  Everspin Technologies

Zhihu Inc ADR

Risk-Adjusted Performance

4 of 100

Modest

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.

Everspin Technologies

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Everspin Technologies are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Everspin Technologies may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Zhihu and Everspin Technologies

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

The idea behind Zhihu Inc ADR and Everspin Technologies 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.