Correlation Between Autohome and UMC Electronics
Can any of the company-specific risk be diversified away by investing in both Autohome and UMC Electronics 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 UMC Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Autohome ADR and UMC Electronics Co, you can compare the effects of market volatilities on Autohome and UMC Electronics 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 UMC Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Autohome and UMC Electronics.
Diversification Opportunities for Autohome and UMC Electronics
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Autohome and UMC is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Autohome ADR and UMC Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UMC Electronics 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 UMC Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UMC Electronics has no effect on the direction of Autohome i.e., Autohome and UMC Electronics go up and down completely randomly.
Pair Corralation between Autohome and UMC Electronics
Assuming the 90 days trading horizon Autohome ADR is expected to generate 0.92 times more return on investment than UMC Electronics. However, Autohome ADR is 1.09 times less risky than UMC Electronics. It trades about 0.16 of its potential returns per unit of risk. UMC Electronics Co is currently generating about 0.07 per unit of risk. If you would invest 2,540 in Autohome ADR on November 28, 2024 and sell it today you would earn a total of 260.00 from holding Autohome ADR or generate 10.24% 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. UMC Electronics Co
Performance |
| Timeline |
| Autohome ADR |
| UMC Electronics |
Autohome and UMC Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Autohome and UMC Electronics
The main advantage of trading using opposite Autohome and UMC Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Autohome position performs unexpectedly, UMC Electronics 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 UMC Electronics will offset losses from the drop in UMC Electronics' long position.| Autohome vs. Playa Hotels Resorts | Autohome vs. BG Foods | Autohome vs. Cal Maine Foods | Autohome vs. DaChan Food Limited |
| UMC Electronics vs. Ultra Clean Holdings | UMC Electronics vs. Hastings Technology Metals | UMC Electronics vs. ULTRA CLEAN HLDGS | UMC Electronics vs. SMA Solar Technology |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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