Correlation Between Autohome and K1RC34

Can any of the company-specific risk be diversified away by investing in both Autohome and K1RC34 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 Autohome and K1RC34 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Autohome and K1RC34, you can compare the effects of market volatilities on Autohome and K1RC34 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 Autohome with a short position of K1RC34. Check out your portfolio center. Please also check ongoing floating volatility patterns of Autohome and K1RC34.

Diversification Opportunities for Autohome and K1RC34

-0.34

Correlation Coefficient

Autohome  K1RC34

Very good diversification

The 3 months correlation between Autohome and K1RC34 is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Autohome and K1RC34 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on K1RC34 and Autohome 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 Autohome are associated (or correlated) with K1RC34. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of K1RC34 has no effect on the direction of Autohome i.e., Autohome and K1RC34 go up and down completely randomly.

Pair Corralation between Autohome and K1RC34

Assuming the 90 days trading horizon Autohome is expected to generate 5.23 times less return on investment than K1RC34. But when comparing it to its historical volatility, Autohome is 1.67 times less risky than K1RC34. It trades about 0.07 of its potential returns per unit of risk. K1RC34 is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  32,571  in K1RC34 on September 25, 2024 and sell it today you would earn a total of  5,391  from holding K1RC34 or generate 16.55% return on investment over 90 days.

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

Autohome  vs.  K1RC34

Autohome

Risk-Adjusted Performance

0 of 100

Very Weak

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

K1RC34

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in K1RC34 are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, K1RC34 sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Autohome and K1RC34

The main advantage of trading using opposite Autohome and K1RC34 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Autohome position performs unexpectedly, K1RC34 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 K1RC34 will offset losses from the drop in K1RC34's long position.

The idea behind Autohome and K1RC34 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.