Correlation Between Baidu and Autohome
Can any of the company-specific risk be diversified away by investing in both Baidu 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 Baidu and Autohome into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Baidu Inc and Autohome, you can compare the effects of market volatilities on Baidu 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 Baidu with a short position of Autohome. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baidu and Autohome.
Diversification Opportunities for Baidu and Autohome
Very poor diversification
The 3 months correlation between Baidu and Autohome is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Baidu Inc and Autohome in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Autohome and Baidu 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 Baidu 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 Baidu i.e., Baidu and Autohome go up and down completely randomly.
Pair Corralation between Baidu and Autohome
Assuming the 90 days trading horizon Baidu Inc is expected to under-perform the Autohome. In addition to that, Baidu is 1.63 times more volatile than Autohome. It trades about -0.21 of its total potential returns per unit of risk. Autohome is currently generating about -0.2 per unit of volatility. If you would invest 1,688 in Autohome on August 27, 2024 and sell it today you would lose (96.00) from holding Autohome or give up 5.69% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Baidu Inc vs. Autohome
Performance |
| Timeline |
| Baidu Inc |
| Autohome |
Baidu and Autohome Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baidu and Autohome
The main advantage of trading using opposite Baidu and Autohome positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baidu 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.The idea behind Baidu Inc and Autohome 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.| Autohome vs. The Bank of | Autohome vs. Paycom Software | Autohome vs. MAHLE Metal Leve | Autohome vs. Waste Management |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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