Correlation Between Autohome and ANGI Homeservices

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

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

Diversification Opportunities for Autohome and ANGI Homeservices

0.22

Correlation Coefficient

Autohome  ANGI Homeservices

Modest diversification

The 3 months correlation between Autohome and ANGI is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Autohome and ANGI Homeservices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ANGI Homeservices 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 ANGI Homeservices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ANGI Homeservices has no effect on the direction of Autohome i.e., Autohome and ANGI Homeservices go up and down completely randomly.

Pair Corralation between Autohome and ANGI Homeservices

Given the investment horizon of 90 days Autohome is expected to generate 0.49 times more return on investment than ANGI Homeservices. However, Autohome is 2.04 times less risky than ANGI Homeservices. It trades about 0.06 of its potential returns per unit of risk. ANGI Homeservices is currently generating about -0.07 per unit of risk. If you would invest  2,650  in Autohome on September 4, 2024 and sell it today you would earn a total of  177.00  from holding Autohome or generate 6.68% return on investment over 90 days.

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

Autohome  vs.  ANGI Homeservices

Autohome

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Autohome are ranked lower than 4 (%) 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 January 2025.

ANGI Homeservices

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ANGI Homeservices has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Autohome and ANGI Homeservices

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

The idea behind Autohome and ANGI Homeservices 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.