Correlation Between Applied Blockchain and Autohome

Can any of the company-specific risk be diversified away by investing in both Applied Blockchain 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 Applied Blockchain and Autohome into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Applied Blockchain and Autohome, you can compare the effects of market volatilities on Applied Blockchain 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 Applied Blockchain with a short position of Autohome. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Blockchain and Autohome.

Diversification Opportunities for Applied Blockchain and Autohome

0.12

Correlation Coefficient

Applied Blockchain  Autohome

Average diversification

The 3 months correlation between Applied and Autohome is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Applied Blockchain and Autohome in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Autohome and Applied Blockchain 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 Applied Blockchain 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 Applied Blockchain i.e., Applied Blockchain and Autohome go up and down completely randomly.

Pair Corralation between Applied Blockchain and Autohome

Given the investment horizon of 90 days Applied Blockchain is expected to under-perform the Autohome. In addition to that, Applied Blockchain is 3.36 times more volatile than Autohome. It trades about -0.12 of its total potential returns per unit of risk. Autohome is currently generating about -0.13 per unit of volatility. If you would invest  2,726  in Autohome on January 25, 2024 and sell it today you would lose (252.00) from holding Autohome or give up 9.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Applied Blockchain  vs.  Autohome

Applied Blockchain

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Applied Blockchain has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Autohome

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Autohome has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical indicators, Autohome is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Applied Blockchain and Autohome

The main advantage of trading using opposite Applied Blockchain and Autohome positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Blockchain 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 Applied Blockchain 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.

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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..