Correlation Between Autohome and Tencent Holdings
Can any of the company-specific risk be diversified away by investing in both Autohome and Tencent Holdings 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 Tencent Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Autohome and Tencent Holdings Ltd, you can compare the effects of market volatilities on Autohome and Tencent Holdings 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 Tencent Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Autohome and Tencent Holdings.
Diversification Opportunities for Autohome and Tencent Holdings
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Autohome and Tencent is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Autohome and Tencent Holdings Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tencent Holdings 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 Tencent Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tencent Holdings has no effect on the direction of Autohome i.e., Autohome and Tencent Holdings go up and down completely randomly.
Pair Corralation between Autohome and Tencent Holdings
Given the investment horizon of 90 days Autohome is expected to under-perform the Tencent Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Autohome is 1.01 times less risky than Tencent Holdings. The stock trades about -0.14 of its potential returns per unit of risk. The Tencent Holdings Ltd is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest 5,408 in Tencent Holdings Ltd on August 27, 2024 and sell it today you would lose (288.00) from holding Tencent Holdings Ltd or give up 5.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Autohome vs. Tencent Holdings Ltd
Performance |
| Timeline |
| Autohome |
| Tencent Holdings |
Autohome and Tencent Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Autohome and Tencent Holdings
The main advantage of trading using opposite Autohome and Tencent Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Autohome position performs unexpectedly, Tencent Holdings 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 Tencent Holdings will offset losses from the drop in Tencent Holdings' long position.| Autohome vs. Hello Group | Autohome vs. Weibo Corp | Autohome vs. Tencent Music Entertainment | Autohome vs. DouYu International Holdings |
| Tencent Holdings vs. Twilio Inc | Tencent Holdings vs. Snap Inc | Tencent Holdings vs. Alphabet Inc Class A | Tencent Holdings vs. Pinterest |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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