Correlation Between Baidu and Carsales
Can any of the company-specific risk be diversified away by investing in both Baidu and Carsales 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 Carsales into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Baidu Inc and CarsalesCom Ltd ADR, you can compare the effects of market volatilities on Baidu and Carsales 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 Carsales. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baidu and Carsales.
Diversification Opportunities for Baidu and Carsales
Very good diversification
The 3 months correlation between Baidu and Carsales is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Baidu Inc and CarsalesCom Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarsalesCom ADR 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 Carsales. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarsalesCom ADR has no effect on the direction of Baidu i.e., Baidu and Carsales go up and down completely randomly.
Pair Corralation between Baidu and Carsales
Assuming the 90 days horizon Baidu Inc is expected to under-perform the Carsales. In addition to that, Baidu is 3.24 times more volatile than CarsalesCom Ltd ADR. It trades about -0.06 of its total potential returns per unit of risk. CarsalesCom Ltd ADR is currently generating about 0.1 per unit of volatility. If you would invest 4,985 in CarsalesCom Ltd ADR on August 30, 2024 and sell it today you would earn a total of 514.00 from holding CarsalesCom Ltd ADR or generate 10.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.73% |
| Values | Daily Returns |
Baidu Inc vs. CarsalesCom Ltd ADR
Performance |
| Timeline |
| Baidu Inc |
| CarsalesCom ADR |
Baidu and Carsales Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baidu and Carsales
The main advantage of trading using opposite Baidu and Carsales positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baidu position performs unexpectedly, Carsales 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 Carsales will offset losses from the drop in Carsales' long position.The idea behind Baidu Inc and CarsalesCom Ltd ADR 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.| Carsales vs. Quizam Media | Carsales vs. DGTL Holdings | Carsales vs. Tinybeans Group Limited | Carsales vs. Sabio Holdings |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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