Correlation Between Tencent Holdings and Baidu
Can any of the company-specific risk be diversified away by investing in both Tencent Holdings 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 Tencent Holdings and Baidu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tencent Holdings Ltd and Baidu Inc, you can compare the effects of market volatilities on Tencent Holdings 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 Tencent Holdings with a short position of Baidu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tencent Holdings and Baidu.
Diversification Opportunities for Tencent Holdings and Baidu
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Tencent and Baidu is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Holdings Ltd and Baidu Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baidu Inc and Tencent Holdings 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 Tencent Holdings Ltd 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 Tencent Holdings i.e., Tencent Holdings and Baidu go up and down completely randomly.
Pair Corralation between Tencent Holdings and Baidu
Assuming the 90 days horizon Tencent Holdings Ltd is expected to generate 0.83 times more return on investment than Baidu. However, Tencent Holdings Ltd is 1.21 times less risky than Baidu. It trades about 0.04 of its potential returns per unit of risk. Baidu Inc is currently generating about -0.01 per unit of risk. If you would invest 3,723 in Tencent Holdings Ltd on August 27, 2024 and sell it today you would earn a total of 1,397 from holding Tencent Holdings Ltd or generate 37.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tencent Holdings Ltd vs. Baidu Inc
Performance |
| Timeline |
| Tencent Holdings |
| Baidu Inc |
Tencent Holdings and Baidu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tencent Holdings and Baidu
The main advantage of trading using opposite Tencent Holdings and Baidu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Holdings 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.| Tencent Holdings vs. Twilio Inc | Tencent Holdings vs. Snap Inc | Tencent Holdings vs. Alphabet Inc Class A | Tencent Holdings vs. Pinterest |
| 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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