Correlation Between Zhihu and Proficient Auto

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

Diversification Opportunities for Zhihu and Proficient Auto

0.47

Correlation Coefficient

Zhihu  Proficient Auto

Very weak diversification

The 3 months correlation between Zhihu and Proficient is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Zhihu Inc ADR and Proficient Auto Logistics, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Proficient Auto Logi 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 Proficient Auto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Proficient Auto Logi has no effect on the direction of Zhihu i.e., Zhihu and Proficient Auto go up and down completely randomly.

Pair Corralation between Zhihu and Proficient Auto

Allowing for the 90-day total investment horizon Zhihu Inc ADR is expected to generate 0.73 times more return on investment than Proficient Auto. However, Zhihu Inc ADR is 1.37 times less risky than Proficient Auto. It trades about 0.33 of its potential returns per unit of risk. Proficient Auto Logistics, is currently generating about 0.07 per unit of risk. If you would invest  349.00  in Zhihu Inc ADR on December 2, 2024 and sell it today you would earn a total of  162.00  from holding Zhihu Inc ADR or generate 46.42% return on investment over 90 days.

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

Zhihu Inc ADR  vs.  Proficient Auto Logistics,

Zhihu Inc ADR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zhihu Inc ADR are ranked lower than 11 (%) 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.

Proficient Auto Logi

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Proficient Auto Logistics, are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Proficient Auto may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Zhihu and Proficient Auto

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

The idea behind Zhihu Inc ADR and Proficient Auto Logistics, 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.