Correlation Between Autohome and Weibo Corp
Can any of the company-specific risk be diversified away by investing in both Autohome and Weibo Corp 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 Autohome and Weibo Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Autohome and Weibo Corp, you can compare the effects of market volatilities on Autohome and Weibo Corp 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 Autohome with a short position of Weibo Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Autohome and Weibo Corp.
Diversification Opportunities for Autohome and Weibo Corp
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Autohome and Weibo is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Autohome and Weibo Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weibo Corp and Autohome 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 Autohome are associated (or correlated) with Weibo Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weibo Corp has no effect on the direction of Autohome i.e., Autohome and Weibo Corp go up and down completely randomly.
Pair Corralation between Autohome and Weibo Corp
Given the investment horizon of 90 days Autohome is expected to under-perform the Weibo Corp. But the stock apears to be less risky and, when comparing its historical volatility, Autohome is 1.49 times less risky than Weibo Corp. The stock trades about -0.03 of its potential returns per unit of risk. The Weibo Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 829.00 in Weibo Corp on January 26, 2024 and sell it today you would earn a total of 24.00 from holding Weibo Corp or generate 2.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Autohome vs. Weibo Corp
Performance |
| Timeline |
| Autohome |
| Weibo Corp |
Autohome and Weibo Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Autohome and Weibo Corp
The main advantage of trading using opposite Autohome and Weibo Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Autohome position performs unexpectedly, Weibo Corp 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 Weibo Corp will offset losses from the drop in Weibo Corp's long position.The idea behind Autohome and Weibo Corp 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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