Correlation Between Autohome and Zillow Group

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

By analyzing existing cross correlation between Autohome and Zillow Group Class, you can compare the effects of market volatilities on Autohome and Zillow Group 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 Zillow Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Autohome and Zillow Group.

Diversification Opportunities for Autohome and Zillow Group

0.2

Correlation Coefficient

Autohome  Zillow Group

Modest diversification

The 3 months correlation between Autohome and Zillow is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Autohome and Zillow Group Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zillow Group Class 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 Zillow Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zillow Group Class has no effect on the direction of Autohome i.e., Autohome and Zillow Group go up and down completely randomly.

Pair Corralation between Autohome and Zillow Group

Given the investment horizon of 90 days Autohome is expected to generate 0.61 times more return on investment than Zillow Group. However, Autohome is 1.64 times less risky than Zillow Group. It trades about -0.02 of its potential returns per unit of risk. Zillow Group Class is currently generating about -0.16 per unit of risk. If you would invest  2,659  in Autohome on January 28, 2024 and sell it today you would lose (59.00) from holding Autohome or give up 2.22% of portfolio value over 90 days.

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

Autohome  vs.  Zillow Group Class

Autohome

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Autohome are ranked lower than 2 (%) 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 recent stock price disarray, may contribute to short-term losses for the investors.

Zillow Group Class

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zillow Group Class has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Etf's basic indicators remain fairly strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the ETF investors.

Pair Trading with Autohome and Zillow Group

The main advantage of trading using opposite Autohome and Zillow Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Autohome position performs unexpectedly, Zillow Group 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 Zillow Group will offset losses from the drop in Zillow Group's long position.

The idea behind Autohome and Zillow Group Class 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.