Correlation Between Zillow and IQIYI

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

By analyzing existing cross correlation between Zillow Group and iQIYI Inc, you can compare the effects of market volatilities on Zillow and IQIYI 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 Zillow with a short position of IQIYI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zillow and IQIYI.

Diversification Opportunities for Zillow and IQIYI

-0.8

Correlation Coefficient

Zillow  IQIYI

Pay attention - limited upside

The 3 months correlation between Zillow and IQIYI is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Zillow Group and iQIYI Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iQIYI Inc and Zillow 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 Zillow Group are associated (or correlated) with IQIYI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iQIYI Inc has no effect on the direction of Zillow i.e., Zillow and IQIYI go up and down completely randomly.

Pair Corralation between Zillow and IQIYI

Allowing for the 90-day total investment horizon Zillow Group is expected to under-perform the IQIYI. But the stock apears to be less risky and, when comparing its historical volatility, Zillow Group is 1.09 times less risky than IQIYI. The stock trades about -0.12 of its potential returns per unit of risk. The iQIYI Inc is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  359.00  in iQIYI Inc on February 15, 2024 and sell it today you would earn a total of  125.00  from holding iQIYI Inc or generate 34.82% return on investment over 90 days.

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

Zillow Group  vs.  iQIYI Inc

Zillow Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zillow Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

iQIYI Inc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iQIYI Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, IQIYI reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zillow and IQIYI

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

The idea behind Zillow Group and iQIYI 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.

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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.