Correlation Between Alphabet and Baidu
Can any of the company-specific risk be diversified away by investing in both Alphabet 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 Alphabet and Baidu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alphabet and Baidu Inc, you can compare the effects of market volatilities on Alphabet 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 Alphabet with a short position of Baidu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and Baidu.
Diversification Opportunities for Alphabet and Baidu
Modest diversification
The 3 months correlation between Alphabet and Baidu is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet and Baidu Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baidu Inc and Alphabet 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 Alphabet 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 Alphabet i.e., Alphabet and Baidu go up and down completely randomly.
Pair Corralation between Alphabet and Baidu
Assuming the 90 days trading horizon Alphabet is expected to under-perform the Baidu. But the stock apears to be less risky and, when comparing its historical volatility, Alphabet is 1.89 times less risky than Baidu. The stock trades about -0.31 of its potential returns per unit of risk. The Baidu Inc is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 3,578 in Baidu Inc on November 18, 2024 and sell it today you would earn a total of 372.00 from holding Baidu Inc or generate 10.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alphabet vs. Baidu Inc
Performance |
| Timeline |
| Alphabet |
| Baidu Inc |
Alphabet and Baidu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alphabet and Baidu
The main advantage of trading using opposite Alphabet and Baidu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet 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.| Alphabet vs. Microchip Technology Incorporated | Alphabet vs. Costco Wholesale | Alphabet vs. Ryanair Holdings plc | Alphabet vs. Paycom Software |
| Baidu vs. Verizon Communications | Baidu vs. Applied Materials, | Baidu vs. SK Telecom Co, | Baidu vs. Fair Isaac |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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