Correlation Between Zhihu and HONEYWELL

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

Diversification Opportunities for Zhihu and HONEYWELL

-0.28

Correlation Coefficient

Zhihu  HONEYWELL

Very good diversification

The 3 months correlation between Zhihu and HONEYWELL is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Zhihu Inc ADR and HONEYWELL INTL INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HONEYWELL INTL INC 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 HONEYWELL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HONEYWELL INTL INC has no effect on the direction of Zhihu i.e., Zhihu and HONEYWELL go up and down completely randomly.

Pair Corralation between Zhihu and HONEYWELL

Allowing for the 90-day total investment horizon Zhihu Inc ADR is expected to generate 2.56 times more return on investment than HONEYWELL. However, Zhihu is 2.56 times more volatile than HONEYWELL INTL INC. It trades about -0.04 of its potential returns per unit of risk. HONEYWELL INTL INC is currently generating about -0.13 per unit of risk. If you would invest  388.00  in Zhihu Inc ADR on October 10, 2024 and sell it today you would lose (43.00) from holding Zhihu Inc ADR or give up 11.08% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	48.39%
Values	Daily Returns

Zhihu Inc ADR  vs.  HONEYWELL INTL INC

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 latest unfluctuating performance, the Stock's technical indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

HONEYWELL INTL INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HONEYWELL INTL INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting 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 HONEYWELL INTL INC investors.

Pair Trading with Zhihu and HONEYWELL

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

The idea behind Zhihu Inc ADR and HONEYWELL INTL INC 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.