Correlation Between Hongkong Land and Autohome ADR

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

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

Diversification Opportunities for Hongkong Land and Autohome ADR

-0.34

Correlation Coefficient

Hongkong Land  Autohome ADR

Very good diversification

The 3 months correlation between Hongkong and Autohome is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Hongkong Land Holdings and Autohome ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Autohome ADR and Hongkong Land 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 Hongkong Land Holdings 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 Hongkong Land i.e., Hongkong Land and Autohome ADR go up and down completely randomly.

Pair Corralation between Hongkong Land and Autohome ADR

Assuming the 90 days horizon Hongkong Land Holdings is expected to generate 1.09 times more return on investment than Autohome ADR. However, Hongkong Land is 1.09 times more volatile than Autohome ADR. It trades about 0.15 of its potential returns per unit of risk. Autohome ADR is currently generating about 0.03 per unit of risk. If you would invest  328.00  in Hongkong Land Holdings on September 20, 2024 and sell it today you would earn a total of  96.00  from holding Hongkong Land Holdings or generate 29.27% return on investment over 90 days.

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

Hongkong Land Holdings  vs.  Autohome ADR

Hongkong Land Holdings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hongkong Land Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Hongkong Land reported solid returns over the last few months and may actually be approaching a breakup point.

Autohome ADR

Risk-Adjusted Performance

2 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Autohome ADR are ranked lower than 2 (%) 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 Hongkong Land and Autohome ADR

The main advantage of trading using opposite Hongkong Land and Autohome ADR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hongkong Land 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 Hongkong Land Holdings 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.