Correlation Between AbbVie and Autohome

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

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

Diversification Opportunities for AbbVie and Autohome

0.21

Correlation Coefficient

AbbVie  Autohome

Modest diversification

The 3 months correlation between AbbVie and Autohome is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding AbbVie Inc and Autohome in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Autohome and AbbVie 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 AbbVie Inc are associated (or correlated) with Autohome. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Autohome has no effect on the direction of AbbVie i.e., AbbVie and Autohome go up and down completely randomly.

Pair Corralation between AbbVie and Autohome

Assuming the 90 days trading horizon AbbVie Inc is expected to generate 0.51 times more return on investment than Autohome. However, AbbVie Inc is 1.97 times less risky than Autohome. It trades about 0.12 of its potential returns per unit of risk. Autohome is currently generating about 0.05 per unit of risk. If you would invest  4,034  in AbbVie Inc on October 8, 2024 and sell it today you would earn a total of  3,029  from holding AbbVie Inc or generate 75.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.88%
Values	Daily Returns

AbbVie Inc  vs.  Autohome

AbbVie Inc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AbbVie Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, AbbVie may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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.

Pair Trading with AbbVie and Autohome

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

The idea behind AbbVie Inc and Autohome 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.