Correlation Between Clean Energy and Autohome ADR

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

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

Diversification Opportunities for Clean Energy and Autohome ADR

-0.12

Correlation Coefficient

Clean Energy  Autohome ADR

Good diversification

The 3 months correlation between Clean and Autohome is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Clean Energy Fuels and Autohome ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Autohome ADR and Clean Energy 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 Clean Energy Fuels are associated (or correlated) with Autohome ADR. 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 Clean Energy i.e., Clean Energy and Autohome ADR go up and down completely randomly.

Pair Corralation between Clean Energy and Autohome ADR

Assuming the 90 days horizon Clean Energy is expected to generate 1.53 times less return on investment than Autohome ADR. In addition to that, Clean Energy is 1.44 times more volatile than Autohome ADR. It trades about 0.03 of its total potential returns per unit of risk. Autohome ADR is currently generating about 0.06 per unit of volatility. If you would invest  2,400  in Autohome ADR on September 12, 2024 and sell it today you would earn a total of  220.00  from holding Autohome ADR or generate 9.17% return on investment over 90 days.

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

Clean Energy Fuels  vs.  Autohome ADR

Clean Energy Fuels

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Clean Energy Fuels are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Clean Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Autohome ADR

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Autohome ADR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical indicators, Autohome ADR may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Clean Energy and Autohome ADR

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

The idea behind Clean Energy Fuels 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.