Correlation Between Zhihu and Brinks

Can any of the company-specific risk be diversified away by investing in both Zhihu and Brinks 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 Brinks 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 Brinks Co 4625, you can compare the effects of market volatilities on Zhihu and Brinks 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 Brinks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhihu and Brinks.

Diversification Opportunities for Zhihu and Brinks

0.26

Correlation Coefficient

Zhihu  Brinks

Modest diversification

The 3 months correlation between Zhihu and Brinks is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Zhihu Inc ADR and Brinks Co 4625 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brinks Co 4625 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 Brinks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brinks Co 4625 has no effect on the direction of Zhihu i.e., Zhihu and Brinks go up and down completely randomly.

Pair Corralation between Zhihu and Brinks

Allowing for the 90-day total investment horizon Zhihu Inc ADR is expected to under-perform the Brinks. But the stock apears to be less risky and, when comparing its historical volatility, Zhihu Inc ADR is 11.86 times less risky than Brinks. The stock trades about -0.02 of its potential returns per unit of risk. The Brinks Co 4625 is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  9,425  in Brinks Co 4625 on October 27, 2024 and sell it today you would lose (329.00) from holding Brinks Co 4625 or give up 3.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	87.04%
Values	Daily Returns

Zhihu Inc ADR  vs.  Brinks Co 4625

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.

Brinks Co 4625

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brinks Co 4625 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for Brinks Co 4625 investors.

Pair Trading with Zhihu and Brinks

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

The idea behind Zhihu Inc ADR and Brinks Co 4625 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.