Correlation Between Major Drilling and AUTOHOME INC

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

By analyzing existing cross correlation between Major Drilling Group and AUTOHOME INC A, you can compare the effects of market volatilities on Major Drilling and AUTOHOME INC 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 Major Drilling with a short position of AUTOHOME INC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Major Drilling and AUTOHOME INC.

Diversification Opportunities for Major Drilling and AUTOHOME INC

-0.15

Correlation Coefficient

Major Drilling  AUTOHOME INC

Good diversification

The 3 months correlation between Major and AUTOHOME is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Major Drilling Group and AUTOHOME INC A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AUTOHOME INC A and Major Drilling 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 Major Drilling Group are associated (or correlated) with AUTOHOME INC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AUTOHOME INC A has no effect on the direction of Major Drilling i.e., Major Drilling and AUTOHOME INC go up and down completely randomly.

Pair Corralation between Major Drilling and AUTOHOME INC

Assuming the 90 days horizon Major Drilling Group is expected to under-perform the AUTOHOME INC. But the stock apears to be less risky and, when comparing its historical volatility, Major Drilling Group is 1.47 times less risky than AUTOHOME INC. The stock trades about -0.06 of its potential returns per unit of risk. The AUTOHOME INC A is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  561.00  in AUTOHOME INC A on December 22, 2024 and sell it today you would earn a total of  104.00  from holding AUTOHOME INC A or generate 18.54% return on investment over 90 days.

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

Major Drilling Group  vs.  AUTOHOME INC A

Major Drilling Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Major Drilling Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

AUTOHOME INC A

Risk-Adjusted Performance

OK

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

Pair Trading with Major Drilling and AUTOHOME INC

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

The idea behind Major Drilling Group and AUTOHOME INC A 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 Global Correlations module to find global opportunities by holding instruments from different markets.