Correlation Between BAIDU and Rumble

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Can any of the company-specific risk be diversified away by investing in both BAIDU and Rumble 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 Rumble into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BAIDU INC 3625 and Rumble Inc, you can compare the effects of market volatilities on BAIDU and Rumble 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 Rumble. Check out your portfolio center. Please also check ongoing floating volatility patterns of BAIDU and Rumble.

Diversification Opportunities for BAIDU and Rumble

0.4
  Correlation Coefficient

Very weak diversification

The 3 months correlation between BAIDU and Rumble is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding BAIDU INC 3625 and Rumble Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rumble Inc 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 3625 are associated (or correlated) with Rumble. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rumble Inc has no effect on the direction of BAIDU i.e., BAIDU and Rumble go up and down completely randomly.

Pair Corralation between BAIDU and Rumble

Assuming the 90 days trading horizon BAIDU INC 3625 is expected to generate 27.03 times more return on investment than Rumble. However, BAIDU is 27.03 times more volatile than Rumble Inc. It trades about 0.12 of its potential returns per unit of risk. Rumble Inc is currently generating about 0.02 per unit of risk. If you would invest  9,391  in BAIDU INC 3625 on August 27, 2024 and sell it today you would earn a total of  355.00  from holding BAIDU INC 3625 or generate 3.78% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy22.78%
ValuesDaily Returns

BAIDU INC 3625  vs.  Rumble Inc

 Performance 
       Timeline  
BAIDU INC 3625 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days BAIDU INC 3625 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, BAIDU is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.
Rumble Inc 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Rumble Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Rumble displayed solid returns over the last few months and may actually be approaching a breakup point.

BAIDU and Rumble Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with BAIDU and Rumble

The main advantage of trading using opposite BAIDU and Rumble positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BAIDU position performs unexpectedly, Rumble 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 Rumble will offset losses from the drop in Rumble's long position.
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The idea behind BAIDU INC 3625 and Rumble 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.
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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.

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