Correlation Between Weibo Corp and Autohome

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

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

Diversification Opportunities for Weibo Corp and Autohome

0.7

Correlation Coefficient

Weibo Corp  Autohome

Poor diversification

The 3 months correlation between Weibo and Autohome is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Weibo Corp and Autohome in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Autohome and Weibo Corp 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 Weibo Corp 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 Weibo Corp i.e., Weibo Corp and Autohome go up and down completely randomly.

Pair Corralation between Weibo Corp and Autohome

Allowing for the 90-day total investment horizon Weibo Corp is expected to generate 1.72 times more return on investment than Autohome. However, Weibo Corp is 1.72 times more volatile than Autohome. It trades about 0.13 of its potential returns per unit of risk. Autohome is currently generating about 0.08 per unit of risk. If you would invest  735.00  in Weibo Corp on September 1, 2024 and sell it today you would earn a total of  225.00  from holding Weibo Corp or generate 30.61% return on investment over 90 days.

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

Weibo Corp  vs.  Autohome

Weibo Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Weibo Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Weibo Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Autohome

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Autohome are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical indicators, Autohome may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Weibo Corp and Autohome

The main advantage of trading using opposite Weibo Corp and Autohome positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Weibo Corp 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 Weibo Corp 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.