Correlation Between Verizon Communications and Baidu
Can any of the company-specific risk be diversified away by investing in both Verizon Communications 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 Verizon Communications and Baidu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and Baidu Inc, you can compare the effects of market volatilities on Verizon Communications 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 Verizon Communications with a short position of Baidu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verizon Communications and Baidu.
Diversification Opportunities for Verizon Communications and Baidu
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Verizon and Baidu is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Baidu Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baidu Inc and Verizon Communications 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 Verizon Communications 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 Verizon Communications i.e., Verizon Communications and Baidu go up and down completely randomly.
Pair Corralation between Verizon Communications and Baidu
Assuming the 90 days horizon Verizon Communications is expected to generate 0.71 times more return on investment than Baidu. However, Verizon Communications is 1.42 times less risky than Baidu. It trades about 0.03 of its potential returns per unit of risk. Baidu Inc is currently generating about -0.02 per unit of risk. If you would invest 65,376 in Verizon Communications on November 1, 2024 and sell it today you would earn a total of 16,924 from holding Verizon Communications or generate 25.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Verizon Communications vs. Baidu Inc
Performance |
| Timeline |
| Verizon Communications |
| Baidu Inc |
Verizon Communications and Baidu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Verizon Communications and Baidu
The main advantage of trading using opposite Verizon Communications and Baidu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications 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.| Verizon Communications vs. Grupo Sports World | Verizon Communications vs. First Majestic Silver | Verizon Communications vs. Micron Technology | Verizon Communications vs. Desarrolladora Homex SAB |
| Baidu vs. Verizon Communications | Baidu vs. GMxico Transportes SAB | Baidu vs. Samsung Electronics Co | Baidu vs. Grupo Sports World |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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