Correlation Between Adobe and Autohome
Can any of the company-specific risk be diversified away by investing in both Adobe and Autohome 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 Adobe and Autohome into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Adobe Inc and Autohome, you can compare the effects of market volatilities on Adobe and Autohome 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 Adobe with a short position of Autohome. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adobe and Autohome.
Diversification Opportunities for Adobe and Autohome
Excellent diversification
The 3 months correlation between Adobe and Autohome is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Adobe Inc and Autohome in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Autohome and Adobe 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 Adobe Inc are associated (or correlated) with Autohome. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Autohome has no effect on the direction of Adobe i.e., Adobe and Autohome go up and down completely randomly.
Pair Corralation between Adobe and Autohome
Assuming the 90 days trading horizon Adobe Inc is expected to generate 1.25 times more return on investment than Autohome. However, Adobe is 1.25 times more volatile than Autohome. It trades about 0.29 of its potential returns per unit of risk. Autohome is currently generating about 0.13 per unit of risk. If you would invest 5,565 in Adobe Inc on September 4, 2024 and sell it today you would earn a total of 663.00 from holding Adobe Inc or generate 11.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Adobe Inc vs. Autohome
Performance |
| Timeline |
| Adobe Inc |
| Autohome |
Adobe and Autohome Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Adobe and Autohome
The main advantage of trading using opposite Adobe and Autohome positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adobe position performs unexpectedly, Autohome 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 Autohome will offset losses from the drop in Autohome's long position.| Adobe vs. Ross Stores | Adobe vs. Charter Communications | Adobe vs. Verizon Communications | Adobe vs. Bemobi Mobile Tech |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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