Correlation Between Autohome and Naspers

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

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

Diversification Opportunities for Autohome and Naspers

0.46

Correlation Coefficient

Autohome  Naspers

Very weak diversification

The 3 months correlation between Autohome and Naspers is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Autohome and Naspers Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Naspers Limited 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 Naspers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Naspers Limited has no effect on the direction of Autohome i.e., Autohome and Naspers go up and down completely randomly.

Pair Corralation between Autohome and Naspers

Given the investment horizon of 90 days Autohome is expected to generate 2.22 times less return on investment than Naspers. But when comparing it to its historical volatility, Autohome is 2.08 times less risky than Naspers. It trades about 0.09 of its potential returns per unit of risk. Naspers Limited is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  20,860  in Naspers Limited on December 29, 2024 and sell it today you would earn a total of  4,515  from holding Naspers Limited or generate 21.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.08%
Values	Daily Returns

Autohome  vs.  Naspers Limited

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.

Naspers Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Naspers Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Naspers reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Autohome and Naspers

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

The idea behind Autohome and Naspers Limited 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.