Correlation Between Samsung Electronics and Autohome

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

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

Diversification Opportunities for Samsung Electronics and Autohome

0.26

Correlation Coefficient

Samsung Electronics  Autohome

Modest diversification

The 3 months correlation between Samsung and Autohome is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and Autohome ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Autohome ADR and Samsung Electronics 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 Samsung Electronics Co 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 ADR has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and Autohome go up and down completely randomly.

Pair Corralation between Samsung Electronics and Autohome

Assuming the 90 days horizon Samsung Electronics Co is expected to under-perform the Autohome. But the stock apears to be less risky and, when comparing its historical volatility, Samsung Electronics Co is 1.6 times less risky than Autohome. The stock trades about 0.0 of its potential returns per unit of risk. The Autohome ADR is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,397  in Autohome ADR on November 28, 2024 and sell it today you would earn a total of  403.00  from holding Autohome ADR or generate 16.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Samsung Electronics Co  vs.  Autohome ADR

Samsung Electronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Samsung Electronics Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Samsung Electronics is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Autohome ADR

Risk-Adjusted Performance

OK

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

Pair Trading with Samsung Electronics and Autohome

The main advantage of trading using opposite Samsung Electronics and Autohome positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Samsung Electronics 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 Samsung Electronics Co and Autohome ADR 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.