Correlation Between K1RC34 and Autohome

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

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

Diversification Opportunities for K1RC34 and Autohome

-0.34

Correlation Coefficient

K1RC34  Autohome

Very good diversification

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

Pair Corralation between K1RC34 and Autohome

Assuming the 90 days trading horizon K1RC34 is expected to generate 1.67 times more return on investment than Autohome. However, K1RC34 is 1.67 times more volatile than Autohome. It trades about 0.21 of its potential returns per unit of risk. Autohome is currently generating about 0.07 per unit of risk. 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

K1RC34  vs.  Autohome

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.

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.

Pair Trading with K1RC34 and Autohome

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

The idea behind K1RC34 and Autohome 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.