Correlation Between Delta Air and Baidu
Can any of the company-specific risk be diversified away by investing in both Delta Air and Baidu 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 Delta Air and Baidu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Delta Air Lines and Baidu Inc, you can compare the effects of market volatilities on Delta Air and Baidu 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 Delta Air with a short position of Baidu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Delta Air and Baidu.
Diversification Opportunities for Delta Air and Baidu
Average diversification
The 3 months correlation between Delta and Baidu is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and Baidu Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baidu Inc and Delta Air 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 Delta Air Lines are associated (or correlated) with Baidu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baidu Inc has no effect on the direction of Delta Air i.e., Delta Air and Baidu go up and down completely randomly.
Pair Corralation between Delta Air and Baidu
Assuming the 90 days trading horizon Delta Air Lines is expected to under-perform the Baidu. But the stock apears to be less risky and, when comparing its historical volatility, Delta Air Lines is 1.71 times less risky than Baidu. The stock trades about -0.27 of its potential returns per unit of risk. The Baidu Inc is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 184,700 in Baidu Inc on November 28, 2024 and sell it today you would lose (4,100) from holding Baidu Inc or give up 2.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Delta Air Lines vs. Baidu Inc
Performance |
| Timeline |
| Delta Air Lines |
| Baidu Inc |
Delta Air and Baidu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Delta Air and Baidu
The main advantage of trading using opposite Delta Air and Baidu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Delta Air position performs unexpectedly, Baidu 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 Baidu will offset losses from the drop in Baidu's long position.| Delta Air vs. Grupo Sports World | Delta Air vs. Applied Materials | Delta Air vs. Steel Dynamics | Delta Air vs. Grupo Hotelero Santa |
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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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