Correlation Between Aedas Homes and Autohome
Can any of the company-specific risk be diversified away by investing in both Aedas Homes and Autohome 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 Aedas Homes and Autohome into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aedas Homes SA and Autohome ADR, you can compare the effects of market volatilities on Aedas Homes and Autohome 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 Aedas Homes with a short position of Autohome. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aedas Homes and Autohome.
Diversification Opportunities for Aedas Homes and Autohome
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Aedas and Autohome is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Aedas Homes SA and Autohome ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Autohome ADR and Aedas Homes 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 Aedas Homes SA are associated (or correlated) with Autohome. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Autohome ADR has no effect on the direction of Aedas Homes i.e., Aedas Homes and Autohome go up and down completely randomly.
Pair Corralation between Aedas Homes and Autohome
Assuming the 90 days horizon Aedas Homes SA is expected to under-perform the Autohome. But the stock apears to be less risky and, when comparing its historical volatility, Aedas Homes SA is 1.1 times less risky than Autohome. The stock trades about -0.1 of its potential returns per unit of risk. The Autohome ADR is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 2,600 in Autohome ADR on September 1, 2024 and sell it today you would lose (80.00) from holding Autohome ADR or give up 3.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aedas Homes SA vs. Autohome ADR
Performance |
| Timeline |
| Aedas Homes SA |
| Autohome ADR |
Aedas Homes and Autohome Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aedas Homes and Autohome
The main advantage of trading using opposite Aedas Homes and Autohome positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aedas Homes position performs unexpectedly, Autohome 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 Autohome will offset losses from the drop in Autohome's long position.The idea behind Aedas Homes SA and Autohome 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.| Autohome vs. International Consolidated Airlines | Autohome vs. INTERSHOP Communications Aktiengesellschaft | Autohome vs. Ribbon Communications | Autohome vs. LION ONE METALS |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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