Correlation Between Homeland Resources and Cheetah Mobile

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

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

Diversification Opportunities for Homeland Resources and Cheetah Mobile

-0.6

Correlation Coefficient

Homeland Resources  Cheetah Mobile

Excellent diversification

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

Pair Corralation between Homeland Resources and Cheetah Mobile

Given the investment horizon of 90 days Homeland Resources is expected to generate 5.86 times more return on investment than Cheetah Mobile. However, Homeland Resources is 5.86 times more volatile than Cheetah Mobile. It trades about 0.09 of its potential returns per unit of risk. Cheetah Mobile is currently generating about 0.07 per unit of risk. If you would invest  0.21  in Homeland Resources on September 12, 2024 and sell it today you would lose (0.19) from holding Homeland Resources or give up 90.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	93.13%
Values	Daily Returns

Homeland Resources  vs.  Cheetah Mobile

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.

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.

Pair Trading with Homeland Resources and Cheetah Mobile

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

The idea behind Homeland Resources and Cheetah Mobile 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.