Correlation Between Zillow Group and Zhihu

Can any of the company-specific risk be diversified away by investing in both Zillow Group and Zhihu 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 Zillow Group and Zhihu into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Zillow Group Class and Zhihu Inc ADR, you can compare the effects of market volatilities on Zillow Group and Zhihu 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 Zillow Group with a short position of Zhihu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zillow Group and Zhihu.

Diversification Opportunities for Zillow Group and Zhihu

0.73

Correlation Coefficient

Zillow Group  Zhihu

Poor diversification

The 3 months correlation between Zillow and Zhihu is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Zillow Group Class and Zhihu Inc ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhihu Inc ADR and Zillow Group 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 Zillow Group Class are associated (or correlated) with Zhihu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhihu Inc ADR has no effect on the direction of Zillow Group i.e., Zillow Group and Zhihu go up and down completely randomly.

Pair Corralation between Zillow Group and Zhihu

Taking into account the 90-day investment horizon Zillow Group Class is expected to under-perform the Zhihu. But the etf apears to be less risky and, when comparing its historical volatility, Zillow Group Class is 1.14 times less risky than Zhihu. The etf trades about -0.19 of its potential returns per unit of risk. The Zhihu Inc ADR is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  80.00  in Zhihu Inc ADR on January 30, 2024 and sell it today you would lose (14.00) from holding Zhihu Inc ADR or give up 17.5% of portfolio value over 90 days.

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

Zillow Group Class  vs.  Zhihu Inc ADR

Zillow Group Class

Risk-Adjusted Performance

0 of 100

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 uncertain performance in the last few months, the Etf's basic indicators remain fairly strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the ETF investors.

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 unsteady 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.

Pair Trading with Zillow Group and Zhihu

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

The idea behind Zillow Group Class and Zhihu Inc ADR 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.