Correlation Between Applied Digital and Autohome

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

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

Diversification Opportunities for Applied Digital and Autohome

-0.26

Correlation Coefficient

Applied Digital  Autohome

Very good diversification

The 3 months correlation between Applied and Autohome is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Applied Digital and Autohome in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Autohome and Applied Digital 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 Applied Digital 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 Applied Digital i.e., Applied Digital and Autohome go up and down completely randomly.

Pair Corralation between Applied Digital and Autohome

Given the investment horizon of 90 days Applied Digital is expected to under-perform the Autohome. In addition to that, Applied Digital is 3.85 times more volatile than Autohome. It trades about -0.03 of its total potential returns per unit of risk. Autohome is currently generating about 0.09 per unit of volatility. If you would invest  2,502  in Autohome on December 29, 2024 and sell it today you would earn a total of  272.00  from holding Autohome or generate 10.87% return on investment over 90 days.

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

Applied Digital  vs.  Autohome

Applied Digital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Applied Digital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Autohome

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Autohome are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical indicators, Autohome may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Applied Digital and Autohome

The main advantage of trading using opposite Applied Digital and Autohome positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Digital 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 Applied Digital 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.

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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.