Correlation Between Zhihu and Playstudios

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

Diversification Opportunities for Zhihu and Playstudios

0.42

Correlation Coefficient

Zhihu  Playstudios

Very weak diversification

The 3 months correlation between Zhihu and Playstudios is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Zhihu Inc ADR and Playstudios in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Playstudios 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 Playstudios. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Playstudios has no effect on the direction of Zhihu i.e., Zhihu and Playstudios go up and down completely randomly.

Pair Corralation between Zhihu and Playstudios

Allowing for the 90-day total investment horizon Zhihu Inc ADR is expected to generate 1.22 times more return on investment than Playstudios. However, Zhihu is 1.22 times more volatile than Playstudios. It trades about -0.03 of its potential returns per unit of risk. Playstudios is currently generating about -0.04 per unit of risk. If you would invest  906.00  in Zhihu Inc ADR on October 25, 2024 and sell it today you would lose (570.00) from holding Zhihu Inc ADR or give up 62.91% of portfolio value over 90 days.

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

Zhihu Inc ADR  vs.  Playstudios

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 fairly strong technical indicators, Zhihu is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Playstudios

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Playstudios are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Playstudios unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zhihu and Playstudios

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

The idea behind Zhihu Inc ADR and Playstudios 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.

Check out your portfolio center.

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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.