Correlation Between Baidu and Groupon
Can any of the company-specific risk be diversified away by investing in both Baidu and Groupon 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 Groupon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Baidu Inc and Groupon, you can compare the effects of market volatilities on Baidu and Groupon 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 Groupon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baidu and Groupon.
Diversification Opportunities for Baidu and Groupon
Very good diversification
The 3 months correlation between Baidu and Groupon is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Baidu Inc and Groupon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Groupon 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 Groupon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Groupon has no effect on the direction of Baidu i.e., Baidu and Groupon go up and down completely randomly.
Pair Corralation between Baidu and Groupon
Given the investment horizon of 90 days Baidu Inc is expected to under-perform the Groupon. But the stock apears to be less risky and, when comparing its historical volatility, Baidu Inc is 3.18 times less risky than Groupon. The stock trades about -0.24 of its potential returns per unit of risk. The Groupon is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 1,027 in Groupon on August 27, 2024 and sell it today you would lose (74.00) from holding Groupon or give up 7.21% 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. Groupon
Performance |
| Timeline |
| Baidu Inc |
| Groupon |
Baidu and Groupon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baidu and Groupon
The main advantage of trading using opposite Baidu and Groupon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baidu position performs unexpectedly, Groupon 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 Groupon will offset losses from the drop in Groupon's long position.| Baidu vs. Tencent Music Entertainment | Baidu vs. Twilio Inc | Baidu vs. Spotify Technology SA | Baidu vs. Weibo Corp |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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