Correlation Between Richardson Electronics and Autohome
Can any of the company-specific risk be diversified away by investing in both Richardson Electronics 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 Richardson Electronics and Autohome into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Richardson Electronics and Autohome ADR, you can compare the effects of market volatilities on Richardson Electronics 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 Richardson Electronics with a short position of Autohome. Check out your portfolio center. Please also check ongoing floating volatility patterns of Richardson Electronics and Autohome.
Diversification Opportunities for Richardson Electronics and Autohome
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Richardson and Autohome is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Richardson Electronics and Autohome ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Autohome ADR and Richardson Electronics 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 Richardson Electronics 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 Richardson Electronics i.e., Richardson Electronics and Autohome go up and down completely randomly.
Pair Corralation between Richardson Electronics and Autohome
Assuming the 90 days horizon Richardson Electronics is expected to generate 1.71 times more return on investment than Autohome. However, Richardson Electronics is 1.71 times more volatile than Autohome ADR. It trades about 0.06 of its potential returns per unit of risk. Autohome ADR is currently generating about -0.01 per unit of risk. If you would invest 1,297 in Richardson Electronics on August 29, 2024 and sell it today you would earn a total of 48.00 from holding Richardson Electronics or generate 3.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Richardson Electronics vs. Autohome ADR
Performance |
| Timeline |
| Richardson Electronics |
| Autohome ADR |
Richardson Electronics and Autohome Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Richardson Electronics and Autohome
The main advantage of trading using opposite Richardson Electronics and Autohome positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Richardson Electronics 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 Richardson Electronics and Autohome ADR 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. DeVry Education Group | Autohome vs. Vulcan Materials | Autohome vs. CHINA EDUCATION GROUP | Autohome vs. STRAYER EDUCATION |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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