Correlation Between Visa and Autohome
Can any of the company-specific risk be diversified away by investing in both Visa 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 Visa and Autohome into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Class A and Autohome, you can compare the effects of market volatilities on Visa 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 Visa with a short position of Autohome. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Autohome.
Diversification Opportunities for Visa and Autohome
Very weak diversification
The 3 months correlation between Visa and Autohome is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Autohome in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Autohome and Visa 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 Visa Class A 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 Visa i.e., Visa and Autohome go up and down completely randomly.
Pair Corralation between Visa and Autohome
Taking into account the 90-day investment horizon Visa Class A is expected to under-perform the Autohome. But the stock apears to be less risky and, when comparing its historical volatility, Visa Class A is 2.89 times less risky than Autohome. The stock trades about -0.11 of its potential returns per unit of risk. The Autohome is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 2,662 in Autohome on February 7, 2024 and sell it today you would earn a total of 28.00 from holding Autohome or generate 1.05% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Visa Class A vs. Autohome
Performance |
Timeline |
Visa Class A |
Autohome |
Visa and Autohome Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Visa and Autohome
The main advantage of trading using opposite Visa and Autohome positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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.Visa vs. American Express | Visa vs. Capital One Financial | Visa vs. Upstart HoldingsInc | Visa vs. Ally Financial |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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