Can any of the company-specific risk be diversified away by investing in both Autohome and Brpr Corporate 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 Autohome and Brpr Corporate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Autohome and Brpr Corporate Offices, you can compare the effects of market volatilities on Autohome and Brpr Corporate 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 Autohome with a short position of Brpr Corporate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Autohome and Brpr Corporate.
Diversification Opportunities for Autohome and Brpr Corporate
The 3 months correlation between Autohome and Brpr is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Autohome and Brpr Corporate Offices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brpr Corporate Offices and Autohome 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 Autohome are associated (or correlated) with Brpr Corporate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brpr Corporate Offices has no effect on the direction of Autohome i.e., Autohome and Brpr Corporate go up and down completely randomly.
Pair Corralation between Autohome and Brpr Corporate
Assuming the 90 days trading horizon Autohome is expected to generate 1.9 times more return on investment than Brpr Corporate. However, Autohome is 1.9 times more volatile than Brpr Corporate Offices. It trades about 0.11 of its potential returns per unit of risk. Brpr Corporate Offices is currently generating about -0.14 per unit of risk. If you would invest 1,354 in Autohome on March 6, 2024 and sell it today you would earn a total of 127.00 from holding Autohome or generate 9.38% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in Autohome are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Autohome sustained solid returns over the last few months and may actually be approaching a breakup point.
Over the last 90 days Brpr Corporate Offices has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Brpr Corporate is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.