Correlation Between AUTOHOME INC and STMicroelectronics

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

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

Diversification Opportunities for AUTOHOME INC and STMicroelectronics

0.61

Correlation Coefficient

AUTOHOME INC  STMicroelectronics

Poor diversification

The 3 months correlation between AUTOHOME and STMicroelectronics is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding AUTOHOME INC A and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and AUTOHOME INC 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 INC A are associated (or correlated) with STMicroelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STMicroelectronics has no effect on the direction of AUTOHOME INC i.e., AUTOHOME INC and STMicroelectronics go up and down completely randomly.

Pair Corralation between AUTOHOME INC and STMicroelectronics

Assuming the 90 days trading horizon AUTOHOME INC A is expected to generate 1.4 times more return on investment than STMicroelectronics. However, AUTOHOME INC is 1.4 times more volatile than STMicroelectronics NV. It trades about -0.12 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about -0.25 per unit of risk. If you would invest  609.00  in AUTOHOME INC A on October 9, 2024 and sell it today you would lose (34.00) from holding AUTOHOME INC A or give up 5.58% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.12%
Values	Daily Returns

AUTOHOME INC A  vs.  STMicroelectronics NV

AUTOHOME INC A

Risk-Adjusted Performance

0 of 100

Very Weak

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

STMicroelectronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STMicroelectronics NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady 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.

Pair Trading with AUTOHOME INC and STMicroelectronics

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

The idea behind AUTOHOME INC A and STMicroelectronics NV 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.