Correlation Between Baidu and Meta Platforms
Can any of the company-specific risk be diversified away by investing in both Baidu and Meta Platforms 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 Meta Platforms into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Baidu Inc and Meta Platforms, you can compare the effects of market volatilities on Baidu and Meta Platforms 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 Meta Platforms. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baidu and Meta Platforms.
Diversification Opportunities for Baidu and Meta Platforms
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Baidu and Meta is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Baidu Inc and Meta Platforms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meta Platforms 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 Meta Platforms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meta Platforms has no effect on the direction of Baidu i.e., Baidu and Meta Platforms go up and down completely randomly.
Pair Corralation between Baidu and Meta Platforms
Given the investment horizon of 90 days Baidu is expected to generate 1.07 times less return on investment than Meta Platforms. In addition to that, Baidu is 4.92 times more volatile than Meta Platforms. It trades about 0.24 of its total potential returns per unit of risk. Meta Platforms is currently generating about 1.28 per unit of volatility. If you would invest 61,277 in Meta Platforms on November 18, 2024 and sell it today you would earn a total of 12,390 from holding Meta Platforms or generate 20.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Baidu Inc vs. Meta Platforms
Performance |
| Timeline |
| Baidu Inc |
| Meta Platforms |
Baidu and Meta Platforms Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baidu and Meta Platforms
The main advantage of trading using opposite Baidu and Meta Platforms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baidu position performs unexpectedly, Meta Platforms 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 Meta Platforms will offset losses from the drop in Meta Platforms' long position.| Baidu vs. Tencent Music Entertainment | Baidu vs. Twilio Inc | Baidu vs. Spotify Technology SA | Baidu vs. Weibo Corp |
| Meta Platforms vs. Alphabet Inc Class A | Meta Platforms vs. Twilio Inc | Meta Platforms vs. Snap Inc | Meta Platforms vs. Baidu Inc |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
Other Complementary Tools
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum |