Correlation Between Autohome and AbbVie
Can any of the company-specific risk be diversified away by investing in both Autohome and AbbVie 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 AbbVie into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Autohome and AbbVie Inc, you can compare the effects of market volatilities on Autohome and AbbVie 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 AbbVie. Check out your portfolio center. Please also check ongoing floating volatility patterns of Autohome and AbbVie.
Diversification Opportunities for Autohome and AbbVie
Average diversification
The 3 months correlation between Autohome and AbbVie is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Autohome and AbbVie Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AbbVie Inc 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 are associated (or correlated) with AbbVie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AbbVie Inc has no effect on the direction of Autohome i.e., Autohome and AbbVie go up and down completely randomly.
Pair Corralation between Autohome and AbbVie
Assuming the 90 days trading horizon Autohome is expected to generate 1.0 times less return on investment than AbbVie. In addition to that, Autohome is 1.76 times more volatile than AbbVie Inc. It trades about 0.02 of its total potential returns per unit of risk. AbbVie Inc is currently generating about 0.04 per unit of volatility. If you would invest 4,852 in AbbVie Inc on September 14, 2024 and sell it today you would earn a total of 1,623 from holding AbbVie Inc or generate 33.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 91.57% |
| Values | Daily Returns |
Autohome vs. AbbVie Inc
Performance |
| Timeline |
| Autohome |
| AbbVie Inc |
Autohome and AbbVie Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Autohome and AbbVie
The main advantage of trading using opposite Autohome and AbbVie positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Autohome position performs unexpectedly, AbbVie 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 AbbVie will offset losses from the drop in AbbVie's long position.| Autohome vs. Nordon Indstrias Metalrgicas | Autohome vs. Uber Technologies | Autohome vs. Technos SA | Autohome vs. The Home Depot |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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