Correlation Between Autohome and Meta Platforms
Can any of the company-specific risk be diversified away by investing in both Autohome and Meta Platforms 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 Autohome and Meta Platforms into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Autohome ADR and Meta Platforms, you can compare the effects of market volatilities on Autohome and Meta Platforms 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 Autohome with a short position of Meta Platforms. Check out your portfolio center. Please also check ongoing floating volatility patterns of Autohome and Meta Platforms.
Diversification Opportunities for Autohome and Meta Platforms
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Autohome and Meta is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Autohome ADR and Meta Platforms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meta Platforms and Autohome 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 Autohome ADR are associated (or correlated) with Meta Platforms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meta Platforms has no effect on the direction of Autohome i.e., Autohome and Meta Platforms go up and down completely randomly.
Pair Corralation between Autohome and Meta Platforms
Assuming the 90 days trading horizon Autohome ADR is expected to under-perform the Meta Platforms. In addition to that, Autohome is 1.24 times more volatile than Meta Platforms. It trades about -0.07 of its total potential returns per unit of risk. Meta Platforms is currently generating about 0.05 per unit of volatility. If you would invest 52,430 in Meta Platforms on August 25, 2024 and sell it today you would earn a total of 770.00 from holding Meta Platforms or generate 1.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Autohome ADR vs. Meta Platforms
Performance |
| Timeline |
| Autohome ADR |
| Meta Platforms |
Autohome and Meta Platforms Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Autohome and Meta Platforms
The main advantage of trading using opposite Autohome and Meta Platforms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Autohome position performs unexpectedly, Meta Platforms 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 Meta Platforms will offset losses from the drop in Meta Platforms' long position.The idea behind Autohome ADR and Meta Platforms 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.| Meta Platforms vs. Amazon Inc | Meta Platforms vs. Apple Inc | Meta Platforms vs. Meta Platforms | Meta Platforms vs. Microsoft |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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