Correlation Between KVH Industries and Zhihu

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

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

Diversification Opportunities for KVH Industries and Zhihu

0.37

Correlation Coefficient

KVH Industries  Zhihu

Weak diversification

The 3 months correlation between KVH and Zhihu is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding KVH Industries 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 KVH Industries 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 KVH Industries 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 KVH Industries i.e., KVH Industries and Zhihu go up and down completely randomly.

Pair Corralation between KVH Industries and Zhihu

Given the investment horizon of 90 days KVH Industries is expected to generate 1.49 times less return on investment than Zhihu. But when comparing it to its historical volatility, KVH Industries is 1.61 times less risky than Zhihu. It trades about 0.04 of its potential returns per unit of risk. Zhihu Inc ADR is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  330.00  in Zhihu Inc ADR on September 3, 2024 and sell it today you would earn a total of  29.00  from holding Zhihu Inc ADR or generate 8.79% return on investment over 90 days.

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

KVH Industries  vs.  Zhihu Inc ADR

KVH Industries

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KVH Industries are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain technical indicators, KVH Industries demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Zhihu Inc ADR

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Zhihu Inc ADR are ranked lower than 4 (%) 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.

Pair Trading with KVH Industries and Zhihu

The main advantage of trading using opposite KVH Industries and Zhihu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KVH Industries 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 KVH Industries 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.

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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.