Correlation Between Baidu and Outbrain

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

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

Diversification Opportunities for Baidu and Outbrain

0.17

Correlation Coefficient

Baidu  Outbrain

Average diversification

The 3 months correlation between Baidu and Outbrain is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Baidu Inc and Outbrain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Outbrain 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 Outbrain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Outbrain has no effect on the direction of Baidu i.e., Baidu and Outbrain go up and down completely randomly.

Pair Corralation between Baidu and Outbrain

Given the investment horizon of 90 days Baidu Inc is expected to under-perform the Outbrain. But the stock apears to be less risky and, when comparing its historical volatility, Baidu Inc is 1.15 times less risky than Outbrain. The stock trades about -0.03 of its potential returns per unit of risk. The Outbrain is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  519.00  in Outbrain on January 29, 2024 and sell it today you would lose (101.00) from holding Outbrain or give up 19.46% of portfolio value over 90 days.

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

Baidu Inc  vs.  Outbrain

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.

Outbrain

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Outbrain are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Outbrain is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Baidu and Outbrain

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

The idea behind Baidu Inc and Outbrain 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.