Correlation Between Autohome and Twilio

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

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

Diversification Opportunities for Autohome and Twilio

-0.56

Correlation Coefficient

Autohome  Twilio

Excellent diversification

The 3 months correlation between Autohome and Twilio is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Autohome and Twilio Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Twilio 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 Twilio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Twilio Inc has no effect on the direction of Autohome i.e., Autohome and Twilio go up and down completely randomly.

Pair Corralation between Autohome and Twilio

Assuming the 90 days trading horizon Autohome is expected to generate 1.07 times more return on investment than Twilio. However, Autohome is 1.07 times more volatile than Twilio Inc. It trades about -0.08 of its potential returns per unit of risk. Twilio Inc is currently generating about -0.13 per unit of risk. If you would invest  1,617  in Autohome on October 13, 2024 and sell it today you would lose (59.00) from holding Autohome or give up 3.65% of portfolio value over 90 days.

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

Autohome  vs.  Twilio Inc

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Twilio Inc

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Twilio Inc are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Twilio sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Autohome and Twilio

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

The idea behind Autohome and Twilio 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..