Correlation Between Homeland Resources and Autohome

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

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

Diversification Opportunities for Homeland Resources and Autohome

-0.54

Correlation Coefficient

Homeland Resources  Autohome

Excellent diversification

The 3 months correlation between Homeland and Autohome is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Homeland Resources and Autohome in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Autohome and Homeland Resources 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 Homeland Resources are associated (or correlated) with Autohome. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Autohome has no effect on the direction of Homeland Resources i.e., Homeland Resources and Autohome go up and down completely randomly.

Pair Corralation between Homeland Resources and Autohome

Given the investment horizon of 90 days Homeland Resources is not expected to generate positive returns. Moreover, Homeland Resources is 9.32 times more volatile than Autohome. It trades away all of its potential returns to assume current level of volatility. Autohome is currently generating about 0.08 per unit of risk. If you would invest  2,557  in Autohome on December 27, 2024 and sell it today you would earn a total of  230.00  from holding Autohome or generate 8.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Homeland Resources  vs.  Autohome

Homeland Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Homeland Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Homeland Resources is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Autohome

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Autohome are ranked lower than 6 (%) 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.

Pair Trading with Homeland Resources and Autohome

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

The idea behind Homeland Resources and Autohome 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.