Correlation Between Baidu and Yelp
Can any of the company-specific risk be diversified away by investing in both Baidu and Yelp 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 Yelp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Baidu Inc and Yelp Inc, you can compare the effects of market volatilities on Baidu and Yelp 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 Yelp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baidu and Yelp.
Diversification Opportunities for Baidu and Yelp
Weak diversification
The 3 months correlation between Baidu and Yelp is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Baidu Inc and Yelp Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yelp Inc 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 Yelp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yelp Inc has no effect on the direction of Baidu i.e., Baidu and Yelp go up and down completely randomly.
Pair Corralation between Baidu and Yelp
Given the investment horizon of 90 days Baidu Inc is expected to generate 1.4 times more return on investment than Yelp. However, Baidu is 1.4 times more volatile than Yelp Inc. It trades about 0.24 of its potential returns per unit of risk. Yelp Inc is currently generating about -0.16 per unit of risk. If you would invest 8,292 in Baidu Inc on November 18, 2024 and sell it today you would earn a total of 1,456 from holding Baidu Inc or generate 17.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Baidu Inc vs. Yelp Inc
Performance |
| Timeline |
| Baidu Inc |
| Yelp Inc |
Baidu and Yelp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baidu and Yelp
The main advantage of trading using opposite Baidu and Yelp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baidu position performs unexpectedly, Yelp 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 Yelp will offset losses from the drop in Yelp'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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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