Correlation Between British American and Autohome
Can any of the company-specific risk be diversified away by investing in both British American 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 British American and Autohome into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between British American Tobacco and Autohome ADR, you can compare the effects of market volatilities on British American 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 British American with a short position of Autohome. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and Autohome.
Diversification Opportunities for British American and Autohome
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between British and Autohome is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and Autohome ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Autohome ADR and British American 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 British American Tobacco 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 British American i.e., British American and Autohome go up and down completely randomly.
Pair Corralation between British American and Autohome
Assuming the 90 days trading horizon British American is expected to generate 1.12 times less return on investment than Autohome. But when comparing it to its historical volatility, British American Tobacco is 4.27 times less risky than Autohome. It trades about 0.13 of its potential returns per unit of risk. Autohome ADR is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 2,378 in Autohome ADR on October 22, 2024 and sell it today you would earn a total of 22.00 from holding Autohome ADR or generate 0.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
British American Tobacco vs. Autohome ADR
Performance |
| Timeline |
| British American Tobacco |
| Autohome ADR |
British American and Autohome Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British American and Autohome
The main advantage of trading using opposite British American and Autohome positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American 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.| British American vs. APPLIED MATERIALS | British American vs. CanSino Biologics | British American vs. Costco Wholesale Corp | British American vs. URBAN OUTFITTERS |
| Autohome vs. EIDESVIK OFFSHORE NK | Autohome vs. Hisense Home Appliances | Autohome vs. OFFICE DEPOT | Autohome vs. BW OFFSHORE LTD |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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