Correlation Between Autohome and Sovereign Metals
Can any of the company-specific risk be diversified away by investing in both Autohome and Sovereign Metals 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 Sovereign Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Autohome ADR and Sovereign Metals Limited, you can compare the effects of market volatilities on Autohome and Sovereign Metals 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 Sovereign Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Autohome and Sovereign Metals.
Diversification Opportunities for Autohome and Sovereign Metals
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Autohome and Sovereign is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Autohome ADR and Sovereign Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sovereign Metals 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 Sovereign Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sovereign Metals has no effect on the direction of Autohome i.e., Autohome and Sovereign Metals go up and down completely randomly.
Pair Corralation between Autohome and Sovereign Metals
Assuming the 90 days trading horizon Autohome ADR is expected to generate 1.31 times more return on investment than Sovereign Metals. However, Autohome is 1.31 times more volatile than Sovereign Metals Limited. It trades about 0.15 of its potential returns per unit of risk. Sovereign Metals Limited is currently generating about 0.05 per unit of risk. If you would invest 2,500 in Autohome ADR on November 6, 2024 and sell it today you would earn a total of 280.00 from holding Autohome ADR or generate 11.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Autohome ADR vs. Sovereign Metals Limited
Performance |
| Timeline |
| Autohome ADR |
| Sovereign Metals |
Autohome and Sovereign Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Autohome and Sovereign Metals
The main advantage of trading using opposite Autohome and Sovereign Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Autohome position performs unexpectedly, Sovereign Metals 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 Sovereign Metals will offset losses from the drop in Sovereign Metals' long position.| Autohome vs. Alfa Financial Software | Autohome vs. MAGIC SOFTWARE ENTR | Autohome vs. PLAYWAY SA ZY 10 | Autohome vs. Playtech plc |
| Sovereign Metals vs. BHP Group Limited | Sovereign Metals vs. Rio Tinto Group | Sovereign Metals vs. Vale SA | Sovereign Metals vs. Vale SA |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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