Correlation Between Naspers and Baidu
Can any of the company-specific risk be diversified away by investing in both Naspers 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 Naspers and Baidu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Naspers Ltd ADR and Baidu Inc, you can compare the effects of market volatilities on Naspers 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 Naspers with a short position of Baidu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Naspers and Baidu.
Diversification Opportunities for Naspers and Baidu
Excellent diversification
The 3 months correlation between Naspers and Baidu is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Naspers Ltd ADR and Baidu Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baidu Inc and Naspers 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 Naspers Ltd ADR 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 Naspers i.e., Naspers and Baidu go up and down completely randomly.
Pair Corralation between Naspers and Baidu
Assuming the 90 days horizon Naspers Ltd ADR is expected to generate 0.48 times more return on investment than Baidu. However, Naspers Ltd ADR is 2.07 times less risky than Baidu. It trades about 0.09 of its potential returns per unit of risk. Baidu Inc is currently generating about -0.01 per unit of risk. If you would invest 3,511 in Naspers Ltd ADR on August 28, 2024 and sell it today you would earn a total of 101.00 from holding Naspers Ltd ADR or generate 2.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 3.95% |
| Values | Daily Returns |
Naspers Ltd ADR vs. Baidu Inc
Performance |
| Timeline |
| Naspers Ltd ADR |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Baidu Inc |
Naspers and Baidu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Naspers and Baidu
The main advantage of trading using opposite Naspers and Baidu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Naspers 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.The idea behind Naspers Ltd ADR and Baidu Inc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Baidu vs. Prosus | Baidu vs. Kuaishou Technology | Baidu vs. Kuaishou Technology | Baidu vs. Tencent Music Entertainment |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
Other Complementary Tools
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Stocks Directory Find actively traded stocks across global markets | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance |