Correlation Between TrueCar and Autohome

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

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

Diversification Opportunities for TrueCar and Autohome

-0.4

Correlation Coefficient

TrueCar  Autohome

Very good diversification

The 3 months correlation between TrueCar and Autohome is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding TrueCar and Autohome in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Autohome and TrueCar 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 TrueCar 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 TrueCar i.e., TrueCar and Autohome go up and down completely randomly.

Pair Corralation between TrueCar and Autohome

Given the investment horizon of 90 days TrueCar is expected to generate 1.34 times more return on investment than Autohome. However, TrueCar is 1.34 times more volatile than Autohome. It trades about 0.18 of its potential returns per unit of risk. Autohome is currently generating about 0.04 per unit of risk. 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

TrueCar  vs.  Autohome

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.

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.

Pair Trading with TrueCar and Autohome

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

Check out your portfolio center.

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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.