Correlation Between Autohome and Basic Materials
Can any of the company-specific risk be diversified away by investing in both Autohome and Basic Materials 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 Basic Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Autohome and Basic Materials, you can compare the effects of market volatilities on Autohome and Basic Materials 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 Basic Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Autohome and Basic Materials.
Diversification Opportunities for Autohome and Basic Materials
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Autohome and Basic is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Autohome and Basic Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Basic Materials 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 Basic Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Basic Materials has no effect on the direction of Autohome i.e., Autohome and Basic Materials go up and down completely randomly.
Pair Corralation between Autohome and Basic Materials
Assuming the 90 days trading horizon Autohome is expected to generate 2.13 times more return on investment than Basic Materials. However, Autohome is 2.13 times more volatile than Basic Materials. It trades about 0.07 of its potential returns per unit of risk. Basic Materials is currently generating about 0.01 per unit of risk. If you would invest 1,215 in Autohome on August 28, 2024 and sell it today you would earn a total of 377.00 from holding Autohome or generate 31.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Autohome vs. Basic Materials
Performance |
| Timeline |
Autohome and Basic Materials Volatility Contrast
Predicted Return Density |
| Returns |
Autohome
Pair trading matchups for Autohome
Basic Materials
Pair trading matchups for Basic Materials
Pair Trading with Autohome and Basic Materials
The main advantage of trading using opposite Autohome and Basic Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Autohome position performs unexpectedly, Basic Materials 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 Basic Materials will offset losses from the drop in Basic Materials' long position.The idea behind Autohome and Basic Materials 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.| Basic Materials vs. Bio Techne | Basic Materials vs. Charter Communications | Basic Materials vs. Metalrgica Riosulense SA | Basic Materials vs. Marvell 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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