Correlation Between Autohome and Amazon

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

By analyzing existing cross correlation between Autohome and Amazon Inc, you can compare the effects of market volatilities on Autohome and Amazon 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 Amazon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Autohome and Amazon.

Diversification Opportunities for Autohome and Amazon

-0.43

Correlation Coefficient

Autohome  Amazon

Very good diversification

The 3 months correlation between Autohome and Amazon is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Autohome and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc 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 are associated (or correlated) with Amazon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon Inc has no effect on the direction of Autohome i.e., Autohome and Amazon go up and down completely randomly.

Pair Corralation between Autohome and Amazon

Assuming the 90 days trading horizon Autohome is expected to generate 1.35 times more return on investment than Amazon. However, Autohome is 1.35 times more volatile than Amazon Inc. It trades about -0.02 of its potential returns per unit of risk. Amazon Inc is currently generating about -0.19 per unit of risk. If you would invest  1,654  in Autohome on December 26, 2024 and sell it today you would lose (60.00) from holding Autohome or give up 3.63% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Autohome  vs.  Amazon Inc

Autohome

Risk-Adjusted Performance

Very Weak

Over the last 90 days Autohome has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Autohome is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Amazon Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amazon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Autohome and Amazon

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

The idea behind Autohome and Amazon Inc 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.