Correlation Between Zhihu and Ubisoft Entertainment

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

Diversification Opportunities for Zhihu and Ubisoft Entertainment

0.19

Correlation Coefficient

Zhihu  Ubisoft Entertainment

Average diversification

The 3 months correlation between Zhihu and Ubisoft is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Zhihu Inc ADR and Ubisoft Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ubisoft Entertainment 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 Ubisoft Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ubisoft Entertainment has no effect on the direction of Zhihu i.e., Zhihu and Ubisoft Entertainment go up and down completely randomly.

Pair Corralation between Zhihu and Ubisoft Entertainment

Allowing for the 90-day total investment horizon Zhihu Inc ADR is expected to under-perform the Ubisoft Entertainment. In addition to that, Zhihu is 2.05 times more volatile than Ubisoft Entertainment. It trades about -0.1 of its total potential returns per unit of risk. Ubisoft Entertainment is currently generating about 0.29 per unit of volatility. If you would invest  2,119  in Ubisoft Entertainment on February 2, 2024 and sell it today you would earn a total of  251.00  from holding Ubisoft Entertainment or generate 11.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Zhihu Inc ADR  vs.  Ubisoft Entertainment

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 weak 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.

Ubisoft Entertainment

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ubisoft Entertainment are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, Ubisoft Entertainment reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zhihu and Ubisoft Entertainment

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

The idea behind Zhihu Inc ADR and Ubisoft Entertainment 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.