Correlation Between Autohome and T Mobile

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

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

Diversification Opportunities for Autohome and T Mobile

-0.37

Correlation Coefficient

Autohome  T Mobile

Very good diversification

The 3 months correlation between Autohome and T1MU34 is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Autohome and T Mobile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T Mobile 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 T Mobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of T Mobile has no effect on the direction of Autohome i.e., Autohome and T Mobile go up and down completely randomly.

Pair Corralation between Autohome and T Mobile

Assuming the 90 days trading horizon Autohome is expected to generate 2.69 times less return on investment than T Mobile. In addition to that, Autohome is 1.58 times more volatile than T Mobile. It trades about 0.04 of its total potential returns per unit of risk. T Mobile is currently generating about 0.18 per unit of volatility. If you would invest  49,086  in T Mobile on September 26, 2024 and sell it today you would earn a total of  19,572  from holding T Mobile or generate 39.87% return on investment over 90 days.

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

Autohome  vs.  T Mobile

Autohome

Risk-Adjusted Performance

0 of 100

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.

T Mobile

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in T Mobile are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain primary indicators, T Mobile sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Autohome and T Mobile

The main advantage of trading using opposite Autohome and T Mobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Autohome position performs unexpectedly, T Mobile 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 T Mobile will offset losses from the drop in T Mobile's long position.

The idea behind Autohome and T Mobile 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.