Correlation Between Mapfre SA and Autohome ADR

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

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

Diversification Opportunities for Mapfre SA and Autohome ADR

-0.52

Correlation Coefficient

Mapfre SA  Autohome ADR

Excellent diversification

The 3 months correlation between Mapfre and Autohome is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Mapfre SA and Autohome ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Autohome ADR and Mapfre SA 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 Mapfre SA 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 Mapfre SA i.e., Mapfre SA and Autohome ADR go up and down completely randomly.

Pair Corralation between Mapfre SA and Autohome ADR

Assuming the 90 days trading horizon Mapfre SA is expected to generate 0.56 times more return on investment than Autohome ADR. However, Mapfre SA is 1.8 times less risky than Autohome ADR. It trades about -0.17 of its potential returns per unit of risk. Autohome ADR is currently generating about -0.18 per unit of risk. If you would invest  251.00  in Mapfre SA on September 22, 2024 and sell it today you would lose (10.00) from holding Mapfre SA or give up 3.98% of portfolio value over 90 days.

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

Mapfre SA  vs.  Autohome ADR

Mapfre SA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mapfre SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Mapfre SA 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

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Autohome ADR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical indicators, Autohome ADR is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Mapfre SA and Autohome ADR

The main advantage of trading using opposite Mapfre SA and Autohome ADR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mapfre SA 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 Mapfre SA 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.

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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.