Correlation Between Zhihu and Zillow Group

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

Diversification Opportunities for Zhihu and Zillow Group

-0.3

Correlation Coefficient

Zhihu  Zillow Group

Very good diversification

The 3 months correlation between Zhihu and Zillow is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Zhihu Inc ADR and Zillow Group Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zillow Group Class 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 Zillow Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zillow Group Class has no effect on the direction of Zhihu i.e., Zhihu and Zillow Group go up and down completely randomly.

Pair Corralation between Zhihu and Zillow Group

Allowing for the 90-day total investment horizon Zhihu Inc ADR is expected to generate 1.97 times more return on investment than Zillow Group. However, Zhihu is 1.97 times more volatile than Zillow Group Class. It trades about 0.12 of its potential returns per unit of risk. Zillow Group Class is currently generating about -0.04 per unit of risk. If you would invest  364.00  in Zhihu Inc ADR on December 23, 2024 and sell it today you would earn a total of  119.00  from holding Zhihu Inc ADR or generate 32.69% return on investment over 90 days.

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

Zhihu Inc ADR  vs.  Zillow Group Class

Zhihu Inc ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zhihu Inc ADR are ranked lower than 9 (%) 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.

Zillow Group Class

Risk-Adjusted Performance

Very Weak

Over the last 90 days Zillow Group Class has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Zillow Group is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Zhihu and Zillow Group

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

The idea behind Zhihu Inc ADR and Zillow Group Class 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.