Correlation Between Autohome and New Hope

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

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

Diversification Opportunities for Autohome and New Hope

0.64

Correlation Coefficient

Autohome  New Hope

Poor diversification

The 3 months correlation between Autohome and New is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Autohome ADR and New Hope in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Hope and Autohome 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 New Hope. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Hope has no effect on the direction of Autohome i.e., Autohome and New Hope go up and down completely randomly.

Pair Corralation between Autohome and New Hope

Assuming the 90 days trading horizon Autohome ADR is expected to generate 1.05 times more return on investment than New Hope. However, Autohome is 1.05 times more volatile than New Hope. It trades about 0.02 of its potential returns per unit of risk. New Hope is currently generating about 0.02 per unit of risk. If you would invest  2,231  in Autohome ADR on October 7, 2024 and sell it today you would earn a total of  169.00  from holding Autohome ADR or generate 7.58% return on investment over 90 days.

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

Autohome ADR  vs.  New Hope

Autohome ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Autohome ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

New Hope

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Hope has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, New Hope is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Autohome and New Hope

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

The idea behind Autohome ADR and New Hope 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.