Correlation Between AM EAGLE and Autohome ADR

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

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

Diversification Opportunities for AM EAGLE and Autohome ADR

0.74

Correlation Coefficient

AM EAGLE  Autohome ADR

Poor diversification

The 3 months correlation between AFG and Autohome is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding AM EAGLE OUTFITTERS and Autohome ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Autohome ADR and AM EAGLE 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 AM EAGLE OUTFITTERS are associated (or correlated) with Autohome ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Autohome ADR has no effect on the direction of AM EAGLE i.e., AM EAGLE and Autohome ADR go up and down completely randomly.

Pair Corralation between AM EAGLE and Autohome ADR

Assuming the 90 days trading horizon AM EAGLE OUTFITTERS is expected to under-perform the Autohome ADR. In addition to that, AM EAGLE is 1.07 times more volatile than Autohome ADR. It trades about -0.02 of its total potential returns per unit of risk. Autohome ADR is currently generating about 0.02 per unit of volatility. If you would invest  2,423  in Autohome ADR on September 30, 2024 and sell it today you would earn a total of  37.00  from holding Autohome ADR or generate 1.53% return on investment over 90 days.

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

AM EAGLE OUTFITTERS  vs.  Autohome ADR

AM EAGLE OUTFITTERS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AM EAGLE OUTFITTERS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Autohome ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Autohome ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with AM EAGLE and Autohome ADR

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

The idea behind AM EAGLE OUTFITTERS and Autohome ADR 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.

Check out your portfolio center.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.