Correlation Between Zhihu and Freeport

Can any of the company-specific risk be diversified away by investing in both Zhihu and Freeport 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 Freeport 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 Freeport McMoRan 5 percent, you can compare the effects of market volatilities on Zhihu and Freeport 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 Freeport. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhihu and Freeport.

Diversification Opportunities for Zhihu and Freeport

0.14

Correlation Coefficient

Zhihu  Freeport

Average diversification

The 3 months correlation between Zhihu and Freeport is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Zhihu Inc ADR and Freeport McMoRan 5 percent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freeport McMoRan 5 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 Freeport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freeport McMoRan 5 has no effect on the direction of Zhihu i.e., Zhihu and Freeport go up and down completely randomly.

Pair Corralation between Zhihu and Freeport

Allowing for the 90-day total investment horizon Zhihu Inc ADR is expected to under-perform the Freeport. In addition to that, Zhihu is 2.64 times more volatile than Freeport McMoRan 5 percent. It trades about -0.11 of its total potential returns per unit of risk. Freeport McMoRan 5 percent is currently generating about -0.21 per unit of volatility. If you would invest  10,021  in Freeport McMoRan 5 percent on October 6, 2024 and sell it today you would lose (329.00) from holding Freeport McMoRan 5 percent or give up 3.28% of portfolio value over 90 days.

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

Zhihu Inc ADR  vs.  Freeport McMoRan 5 percent

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 abnormal performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Freeport McMoRan 5

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Freeport McMoRan 5 percent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Freeport is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Zhihu and Freeport

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

The idea behind Zhihu Inc ADR and Freeport McMoRan 5 percent 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.