Correlation Between Autohome ADR and Moneysupermarket

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

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

Diversification Opportunities for Autohome ADR and Moneysupermarket

0.49

Correlation Coefficient

Autohome ADR  Moneysupermarket

Very weak diversification

The 3 months correlation between Autohome and Moneysupermarket is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Autohome ADR and Moneysupermarket Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moneysupermarket and Autohome ADR 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 ADR are associated (or correlated) with Moneysupermarket. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moneysupermarket has no effect on the direction of Autohome ADR i.e., Autohome ADR and Moneysupermarket go up and down completely randomly.

Pair Corralation between Autohome ADR and Moneysupermarket

Assuming the 90 days trading horizon Autohome ADR is expected to under-perform the Moneysupermarket. In addition to that, Autohome ADR is 1.21 times more volatile than Moneysupermarket Group PLC. It trades about -0.18 of its total potential returns per unit of risk. Moneysupermarket Group PLC is currently generating about -0.02 per unit of volatility. If you would invest  219.00  in Moneysupermarket Group PLC on September 22, 2024 and sell it today you would lose (2.00) from holding Moneysupermarket Group PLC or give up 0.91% of portfolio value over 90 days.

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

Autohome ADR  vs.  Moneysupermarket Group PLC

Autohome ADR

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Autohome ADR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical indicators, Autohome ADR is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Moneysupermarket

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Moneysupermarket Group PLC 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.

Pair Trading with Autohome ADR and Moneysupermarket

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

The idea behind Autohome ADR and Moneysupermarket Group PLC 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.