Correlation Between Autohome Inc and Youdao Inc

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Can any of the company-specific risk be diversified away by investing in both Autohome Inc and Youdao Inc 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 Youdao Inc 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 Youdao Inc ADR, you can compare the effects of market volatilities on Autohome Inc and Youdao Inc 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 Youdao Inc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Autohome Inc and Youdao Inc.

Diversification Opportunities for Autohome Inc and Youdao Inc

-0.12
  Correlation Coefficient

Good diversification

The 3 months correlation between Autohome and Youdao is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Autohome Inc ADR and Youdao Inc ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Youdao Inc ADR 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 Youdao Inc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Youdao Inc ADR has no effect on the direction of Autohome Inc i.e., Autohome Inc and Youdao Inc go up and down completely randomly.

Pair Corralation between Autohome Inc and Youdao Inc

Given the investment horizon of 90 days Autohome Inc ADR is expected to generate 0.81 times more return on investment than Youdao Inc. However, Autohome Inc ADR is 1.23 times less risky than Youdao Inc. It trades about 0.01 of its potential returns per unit of risk. Youdao Inc ADR is currently generating about -0.06 per unit of risk. If you would invest  3,550  in Autohome Inc ADR on May 16, 2022 and sell it today you would lose (27.00)  from holding Autohome Inc ADR or give up 0.76% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Autohome Inc ADR  vs.  Youdao Inc ADR

 Performance (%) 
       Timeline  
Autohome ADR 
Autohome Performance
8 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Autohome Inc ADR are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady technical indicators, Autohome Inc revealed solid returns over the last few months and may actually be approaching a breakup point.

Autohome Price Channel

Youdao Inc ADR 
Youdao Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Youdao Inc ADR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Youdao Inc disclosed solid returns over the last few months and may actually be approaching a breakup point.

Youdao Price Channel

Autohome Inc and Youdao Inc Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Autohome Inc and Youdao Inc

The main advantage of trading using opposite Autohome Inc and Youdao Inc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Autohome Inc position performs unexpectedly, Youdao Inc 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 Youdao Inc will offset losses from the drop in Youdao Inc's long position.
The idea behind Autohome Inc ADR and Youdao Inc ADR 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.

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