Correlation Between Baidu and Prosus
Can any of the company-specific risk be diversified away by investing in both Baidu and Prosus 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 Prosus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Baidu Inc and Prosus, you can compare the effects of market volatilities on Baidu and Prosus 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 Prosus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baidu and Prosus.
Diversification Opportunities for Baidu and Prosus
Average diversification
The 3 months correlation between Baidu and Prosus is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Baidu Inc and Prosus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prosus 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 Prosus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prosus has no effect on the direction of Baidu i.e., Baidu and Prosus go up and down completely randomly.
Pair Corralation between Baidu and Prosus
Assuming the 90 days horizon Baidu Inc is expected to generate 3.23 times more return on investment than Prosus. However, Baidu is 3.23 times more volatile than Prosus. It trades about 0.06 of its potential returns per unit of risk. Prosus is currently generating about -0.06 per unit of risk. If you would invest 999.00 in Baidu Inc on November 4, 2024 and sell it today you would earn a total of 68.00 from holding Baidu Inc or generate 6.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 97.56% |
| Values | Daily Returns |
Baidu Inc vs. Prosus
Performance |
| Timeline |
| Baidu Inc |
| Prosus |
Baidu and Prosus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baidu and Prosus
The main advantage of trading using opposite Baidu and Prosus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baidu position performs unexpectedly, Prosus 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 Prosus will offset losses from the drop in Prosus' long position.| Baidu vs. Prosus | Baidu vs. Kuaishou Technology | Baidu vs. Kuaishou Technology | Baidu vs. Tencent Music Entertainment |
| Prosus vs. Tencent Holdings | Prosus vs. Autohome | Prosus vs. Arena Group Holdings | Prosus vs. Golden Grail Technology |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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