Correlation Between Cheetah Mobile and Homeland Resources

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

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

Diversification Opportunities for Cheetah Mobile and Homeland Resources

-0.6

Correlation Coefficient

Cheetah Mobile  Homeland Resources

Excellent diversification

The 3 months correlation between Cheetah and Homeland is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Cheetah Mobile and Homeland Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Homeland Resources and Cheetah Mobile 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 Cheetah Mobile are associated (or correlated) with Homeland Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Homeland Resources has no effect on the direction of Cheetah Mobile i.e., Cheetah Mobile and Homeland Resources go up and down completely randomly.

Pair Corralation between Cheetah Mobile and Homeland Resources

Given the investment horizon of 90 days Cheetah Mobile is expected to generate 3.64 times less return on investment than Homeland Resources. But when comparing it to its historical volatility, Cheetah Mobile is 6.84 times less risky than Homeland Resources. It trades about 0.15 of its potential returns per unit of risk. Homeland Resources is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  0.09  in Homeland Resources on September 12, 2024 and sell it today you would lose (0.07) from holding Homeland Resources or give up 77.78% of portfolio value over 90 days.

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

Cheetah Mobile  vs.  Homeland Resources

Cheetah Mobile

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cheetah Mobile are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Cheetah Mobile displayed solid returns over the last few months and may actually be approaching a breakup point.

Homeland Resources

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Homeland Resources are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Homeland Resources sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cheetah Mobile and Homeland Resources

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

The idea behind Cheetah Mobile and Homeland Resources 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.