Correlation Between Cango and AirbnbInc

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

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

Diversification Opportunities for Cango and AirbnbInc

0.67

Correlation Coefficient

Cango  AirbnbInc

Poor diversification

The 3 months correlation between Cango and AirbnbInc is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Cango Inc and AirbnbInc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AirbnbInc and Cango 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 Cango Inc are associated (or correlated) with AirbnbInc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AirbnbInc has no effect on the direction of Cango i.e., Cango and AirbnbInc go up and down completely randomly.

Pair Corralation between Cango and AirbnbInc

Given the investment horizon of 90 days Cango Inc is expected to under-perform the AirbnbInc. In addition to that, Cango is 1.57 times more volatile than AirbnbInc. It trades about -0.06 of its total potential returns per unit of risk. AirbnbInc is currently generating about -0.06 per unit of volatility. If you would invest  16,739  in AirbnbInc on January 26, 2024 and sell it today you would lose (455.00) from holding AirbnbInc or give up 2.72% of portfolio value over 90 days.

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

Cango Inc  vs.  AirbnbInc

Cango Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cango Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Cango reported solid returns over the last few months and may actually be approaching a breakup point.

AirbnbInc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AirbnbInc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, AirbnbInc may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Cango and AirbnbInc

The main advantage of trading using opposite Cango and AirbnbInc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cango position performs unexpectedly, AirbnbInc 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 AirbnbInc will offset losses from the drop in AirbnbInc's long position.

The idea behind Cango Inc and AirbnbInc 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.