Correlation Between Fast Retailing and Autohome
Can any of the company-specific risk be diversified away by investing in both Fast Retailing 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 Fast Retailing and Autohome into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fast Retailing Co and Autohome ADR, you can compare the effects of market volatilities on Fast Retailing 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 Fast Retailing with a short position of Autohome. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fast Retailing and Autohome.
Diversification Opportunities for Fast Retailing and Autohome
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fast and Autohome is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and Autohome ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Autohome ADR and Fast Retailing 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 Fast Retailing Co 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 Fast Retailing i.e., Fast Retailing and Autohome go up and down completely randomly.
Pair Corralation between Fast Retailing and Autohome
Assuming the 90 days trading horizon Fast Retailing is expected to generate 1.15 times less return on investment than Autohome. But when comparing it to its historical volatility, Fast Retailing Co is 1.33 times less risky than Autohome. It trades about 0.04 of its potential returns per unit of risk. Autohome ADR is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 2,384 in Autohome ADR on August 25, 2024 and sell it today you would earn a total of 296.00 from holding Autohome ADR or generate 12.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fast Retailing Co vs. Autohome ADR
Performance |
| Timeline |
| Fast Retailing |
| Autohome ADR |
Fast Retailing and Autohome Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fast Retailing and Autohome
The main advantage of trading using opposite Fast Retailing and Autohome positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fast Retailing 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.| Fast Retailing vs. Autohome ADR | Fast Retailing vs. KB HOME | Fast Retailing vs. Sqs Software Quality | Fast Retailing vs. Alfa Financial Software |
| Autohome vs. Microbot Medical | Autohome vs. Apollo Medical Holdings | Autohome vs. Meli Hotels International | Autohome vs. Dalata Hotel Group |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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