Correlation Between Cheetah Mobile and TrueCar

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

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

Diversification Opportunities for Cheetah Mobile and TrueCar

-0.28

Correlation Coefficient

Cheetah Mobile  TrueCar

Very good diversification

The 3 months correlation between Cheetah and TrueCar is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Cheetah Mobile and TrueCar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TrueCar 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 TrueCar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TrueCar has no effect on the direction of Cheetah Mobile i.e., Cheetah Mobile and TrueCar go up and down completely randomly.

Pair Corralation between Cheetah Mobile and TrueCar

Given the investment horizon of 90 days Cheetah Mobile is expected to generate 1.28 times more return on investment than TrueCar. However, Cheetah Mobile is 1.28 times more volatile than TrueCar. It trades about 0.0 of its potential returns per unit of risk. TrueCar is currently generating about -0.33 per unit of risk. If you would invest  476.00  in Cheetah Mobile on December 29, 2024 and sell it today you would lose (38.00) from holding Cheetah Mobile or give up 7.98% of portfolio value over 90 days.

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

Cheetah Mobile  vs.  TrueCar

Cheetah Mobile

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cheetah Mobile has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Cheetah Mobile is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

TrueCar

Risk-Adjusted Performance

Very Weak

Over the last 90 days TrueCar has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic 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.

Pair Trading with Cheetah Mobile and TrueCar

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

The idea behind Cheetah Mobile and TrueCar 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.