Correlation Between Aluminumof China and Autohome
Can any of the company-specific risk be diversified away by investing in both Aluminumof China 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 Aluminumof China and Autohome into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aluminum of and Autohome ADR, you can compare the effects of market volatilities on Aluminumof China 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 Aluminumof China with a short position of Autohome. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aluminumof China and Autohome.
Diversification Opportunities for Aluminumof China and Autohome
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Aluminumof and Autohome is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Aluminum of and Autohome ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Autohome ADR and Aluminumof China 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 Aluminum of 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 ADR has no effect on the direction of Aluminumof China i.e., Aluminumof China and Autohome go up and down completely randomly.
Pair Corralation between Aluminumof China and Autohome
Assuming the 90 days horizon Aluminum of is expected to generate 0.73 times more return on investment than Autohome. However, Aluminum of is 1.37 times less risky than Autohome. It trades about 0.29 of its potential returns per unit of risk. Autohome ADR is currently generating about 0.18 per unit of risk. If you would invest 53.00 in Aluminum of on October 23, 2024 and sell it today you would earn a total of 8.00 from holding Aluminum of or generate 15.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aluminum of vs. Autohome ADR
Performance |
| Timeline |
| Aluminumof China |
| Autohome ADR |
Aluminumof China and Autohome Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aluminumof China and Autohome
The main advantage of trading using opposite Aluminumof China and Autohome positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aluminumof China 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.| Aluminumof China vs. MOLSON RS BEVERAGE | Aluminumof China vs. Corporate Office Properties | Aluminumof China vs. PLANT VEDA FOODS | Aluminumof China vs. FIH MOBILE |
| Autohome vs. Aluminum of | Autohome vs. G III Apparel Group | Autohome vs. DAIDO METAL TD | Autohome vs. SIERRA METALS |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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