Correlation Between Autohome Inc and Arena

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Can any of the company-specific risk be diversified away by investing in both Autohome Inc and Arena 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 Inc and Arena into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Autohome Inc ADR and The Arena Group, you can compare the effects of market volatilities on Autohome Inc and Arena 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 Inc with a short position of Arena. Check out your portfolio center. Please also check ongoing floating volatility patterns of Autohome Inc and Arena.

Diversification Opportunities for Autohome Inc and Arena

-0.68
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Autohome and Arena is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Autohome Inc ADR and The Arena Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arena Group and Autohome Inc 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 Inc ADR are associated (or correlated) with Arena. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arena Group has no effect on the direction of Autohome Inc i.e., Autohome Inc and Arena go up and down completely randomly.

Pair Corralation between Autohome Inc and Arena

Given the investment horizon of 90 days Autohome Inc ADR is expected to under-perform the Arena. But the stock apears to be less risky and, when comparing its historical volatility, Autohome Inc ADR is 1.89 times less risky than Arena. The stock trades about -0.05 of its potential returns per unit of risk. The The Arena Group is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,364  in The Arena Group on July 9, 2022 and sell it today you would lose (122.00)  from holding The Arena Group or give up 8.94% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Autohome Inc ADR  vs.  The Arena Group

 Performance (%) 
       Timeline  
Autohome ADR 
Autohome Performance
0 of 100
Over the last 90 days Autohome Inc ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's technical indicators remain steady and the new chaos on Wall Street may also be a sign of medium-term gains for the company stakeholders.

Autohome Price Channel

Arena Group 
Arena Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in The Arena Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain technical and fundamental indicators, Arena disclosed solid returns over the last few months and may actually be approaching a breakup point.

Arena Price Channel

Autohome Inc and Arena Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Autohome Inc and Arena

The main advantage of trading using opposite Autohome Inc and Arena positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Autohome Inc position performs unexpectedly, Arena 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 Arena will offset losses from the drop in Arena's long position.
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The idea behind Autohome Inc ADR and The Arena Group 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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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 CEO Directory module to screen CEOs from public companies around the world.

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