Correlation Between Autohome and Chevron

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

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

Diversification Opportunities for Autohome and Chevron

-0.39

Correlation Coefficient

Autohome  Chevron

Very good diversification

The 3 months correlation between Autohome and Chevron is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Autohome and Chevron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron 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 Chevron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chevron has no effect on the direction of Autohome i.e., Autohome and Chevron go up and down completely randomly.

Pair Corralation between Autohome and Chevron

Assuming the 90 days trading horizon Autohome is expected to generate 1.43 times less return on investment than Chevron. In addition to that, Autohome is 2.54 times more volatile than Chevron. It trades about 0.18 of its total potential returns per unit of risk. Chevron is currently generating about 0.66 per unit of volatility. If you would invest  8,690  in Chevron on October 20, 2024 and sell it today you would earn a total of  1,059  from holding Chevron or generate 12.19% return on investment over 90 days.

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

Autohome  vs.  Chevron

Autohome

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Autohome are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Chevron

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chevron sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Autohome and Chevron

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

The idea behind Autohome and Chevron 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.