Correlation Between Autohome and TrueCar

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

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

Diversification Opportunities for Autohome and TrueCar

-0.4

Correlation Coefficient

Autohome  TrueCar

Very good diversification

The 3 months correlation between Autohome and TrueCar is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Autohome and TrueCar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TrueCar 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 TrueCar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TrueCar has no effect on the direction of Autohome i.e., Autohome and TrueCar go up and down completely randomly.

Pair Corralation between Autohome and TrueCar

Given the investment horizon of 90 days Autohome is expected to generate 5.84 times less return on investment than TrueCar. But when comparing it to its historical volatility, Autohome is 1.34 times less risky than TrueCar. It trades about 0.04 of its potential returns per unit of risk. TrueCar is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  313.00  in TrueCar on September 12, 2024 and sell it today you would earn a total of  115.00  from holding TrueCar or generate 36.74% return on investment over 90 days.

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

Autohome  vs.  TrueCar

Autohome

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Autohome are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical indicators, Autohome is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

TrueCar

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TrueCar are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, TrueCar exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Autohome and TrueCar

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

The idea behind Autohome and TrueCar 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.