Correlation Between Baidu and DoorDash

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

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

Diversification Opportunities for Baidu and DoorDash

-0.39

Correlation Coefficient

Baidu  DoorDash

Very good diversification

The 3 months correlation between Baidu and DoorDash is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Baidu Inc and DoorDash Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DoorDash Class A 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 DoorDash. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DoorDash Class A has no effect on the direction of Baidu i.e., Baidu and DoorDash go up and down completely randomly.

Pair Corralation between Baidu and DoorDash

Given the investment horizon of 90 days Baidu Inc is expected to generate 0.97 times more return on investment than DoorDash. However, Baidu Inc is 1.03 times less risky than DoorDash. It trades about -0.02 of its potential returns per unit of risk. DoorDash Class A is currently generating about -0.08 per unit of risk. If you would invest  10,402  in Baidu Inc on March 1, 2024 and sell it today you would lose (426.00) from holding Baidu Inc or give up 4.1% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Baidu Inc  vs.  DoorDash Class A

Baidu Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Baidu Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Baidu is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

DoorDash Class A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DoorDash Class A has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Baidu and DoorDash

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

The idea behind Baidu Inc and DoorDash Class A 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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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.