Correlation Between Alphabet and Autohome
Can any of the company-specific risk be diversified away by investing in both Alphabet 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 Alphabet and Autohome into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alphabet Inc Class C and Autohome, you can compare the effects of market volatilities on Alphabet 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 Alphabet with a short position of Autohome. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and Autohome.
Diversification Opportunities for Alphabet and Autohome
Significant diversification
The 3 months correlation between Alphabet and Autohome is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Autohome in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Autohome and Alphabet 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 Alphabet Inc Class C 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 Alphabet i.e., Alphabet and Autohome go up and down completely randomly.
Pair Corralation between Alphabet and Autohome
Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 0.76 times more return on investment than Autohome. However, Alphabet Inc Class C is 1.32 times less risky than Autohome. It trades about 0.06 of its potential returns per unit of risk. Autohome is currently generating about 0.03 per unit of risk. If you would invest 13,299 in Alphabet Inc Class C on August 27, 2024 and sell it today you would earn a total of 3,358 from holding Alphabet Inc Class C or generate 25.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alphabet Inc Class C vs. Autohome
Performance |
| Timeline |
| Alphabet Class C |
| Autohome |
Alphabet and Autohome Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alphabet and Autohome
The main advantage of trading using opposite Alphabet and Autohome positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet 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 Alphabet Inc Class C 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.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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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