Correlation Between Baidu and IAC
Can any of the company-specific risk be diversified away by investing in both Baidu and IAC 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 Baidu and IAC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Baidu Inc and IAC Inc, you can compare the effects of market volatilities on Baidu and IAC 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 Baidu with a short position of IAC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baidu and IAC.
Diversification Opportunities for Baidu and IAC
Very weak diversification
The 3 months correlation between Baidu and IAC is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Baidu Inc and IAC Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IAC Inc and Baidu 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 Baidu Inc are associated (or correlated) with IAC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IAC Inc has no effect on the direction of Baidu i.e., Baidu and IAC go up and down completely randomly.
Pair Corralation between Baidu and IAC
Given the investment horizon of 90 days Baidu Inc is expected to generate 1.18 times more return on investment than IAC. However, Baidu is 1.18 times more volatile than IAC Inc. It trades about 0.01 of its potential returns per unit of risk. IAC Inc is currently generating about -0.02 per unit of risk. If you would invest 11,676 in Baidu Inc on January 26, 2024 and sell it today you would lose (1,757) from holding Baidu Inc or give up 15.05% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Baidu Inc vs. IAC Inc
Performance |
| Timeline |
| Baidu Inc |
| IAC Inc |
Baidu and IAC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baidu and IAC
The main advantage of trading using opposite Baidu and IAC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baidu position performs unexpectedly, IAC 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 IAC will offset losses from the drop in IAC's long position.The idea behind Baidu Inc and IAC Inc 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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