Correlation Between Autohome and Alphabet

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

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

Diversification Opportunities for Autohome and Alphabet

0.02

Correlation Coefficient

Autohome  Alphabet

Significant diversification

The 3 months correlation between Autohome and Alphabet is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Autohome and Alphabet Inc Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alphabet Class A 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 Alphabet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alphabet Class A has no effect on the direction of Autohome i.e., Autohome and Alphabet go up and down completely randomly.

Pair Corralation between Autohome and Alphabet

Given the investment horizon of 90 days Autohome is expected to generate 1.45 times more return on investment than Alphabet. However, Autohome is 1.45 times more volatile than Alphabet Inc Class A. It trades about 0.06 of its potential returns per unit of risk. Alphabet Inc Class A is currently generating about 0.04 per unit of risk. If you would invest  2,516  in Autohome on August 30, 2024 and sell it today you would earn a total of  187.00  from holding Autohome or generate 7.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Autohome  vs.  Alphabet Inc Class A

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 December 2024.

Alphabet Class A

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class A are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical and fundamental indicators, Alphabet is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Autohome and Alphabet

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

The idea behind Autohome and Alphabet Inc Class A 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.