Correlation Between Baidu and Prudential Financial
Can any of the company-specific risk be diversified away by investing in both Baidu and Prudential Financial 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 Prudential Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Baidu Inc and Prudential Financial, you can compare the effects of market volatilities on Baidu and Prudential Financial 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 Prudential Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baidu and Prudential Financial.
Diversification Opportunities for Baidu and Prudential Financial
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Baidu and Prudential is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Baidu Inc and Prudential Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Financial 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 Prudential Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Financial has no effect on the direction of Baidu i.e., Baidu and Prudential Financial go up and down completely randomly.
Pair Corralation between Baidu and Prudential Financial
Assuming the 90 days trading horizon Baidu Inc is expected to under-perform the Prudential Financial. In addition to that, Baidu is 2.82 times more volatile than Prudential Financial. It trades about -0.01 of its total potential returns per unit of risk. Prudential Financial is currently generating about 0.12 per unit of volatility. If you would invest 154,825 in Prudential Financial on September 4, 2024 and sell it today you would earn a total of 46,675 from holding Prudential Financial or generate 30.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Baidu Inc vs. Prudential Financial
Performance |
| Timeline |
| Baidu Inc |
| Prudential Financial |
Baidu and Prudential Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baidu and Prudential Financial
The main advantage of trading using opposite Baidu and Prudential Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baidu position performs unexpectedly, Prudential Financial 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 Prudential Financial will offset losses from the drop in Prudential Financial's long position.| Baidu vs. Micron Technology | Baidu vs. Cognizant Technology Solutions | Baidu vs. Monster Beverage Corp | Baidu vs. Prudential Financial |
| Prudential Financial vs. The Select Sector | Prudential Financial vs. Promotora y Operadora | Prudential Financial vs. SPDR Series Trust | Prudential Financial vs. Vanguard World |
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..
Other Complementary Tools
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets |