Correlation Between Autohome and STMicroelectronics
Can any of the company-specific risk be diversified away by investing in both Autohome and STMicroelectronics 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 STMicroelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Autohome ADR and STMicroelectronics NV, you can compare the effects of market volatilities on Autohome and STMicroelectronics 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 STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Autohome and STMicroelectronics.
Diversification Opportunities for Autohome and STMicroelectronics
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Autohome and STMicroelectronics is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Autohome ADR and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics 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 STMicroelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STMicroelectronics has no effect on the direction of Autohome i.e., Autohome and STMicroelectronics go up and down completely randomly.
Pair Corralation between Autohome and STMicroelectronics
Assuming the 90 days trading horizon Autohome ADR is expected to generate 0.86 times more return on investment than STMicroelectronics. However, Autohome ADR is 1.17 times less risky than STMicroelectronics. It trades about -0.01 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about -0.11 per unit of risk. If you would invest 2,600 in Autohome ADR on August 29, 2024 and sell it today you would lose (20.00) from holding Autohome ADR or give up 0.77% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Autohome ADR vs. STMicroelectronics NV
Performance |
| Timeline |
| Autohome ADR |
| STMicroelectronics |
Autohome and STMicroelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Autohome and STMicroelectronics
The main advantage of trading using opposite Autohome and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Autohome position performs unexpectedly, STMicroelectronics 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 STMicroelectronics will offset losses from the drop in STMicroelectronics' long position.| Autohome vs. DeVry Education Group | Autohome vs. Vulcan Materials | Autohome vs. CHINA EDUCATION GROUP | Autohome vs. STRAYER EDUCATION |
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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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