Correlation Between Yelp and Baidu
Can any of the company-specific risk be diversified away by investing in both Yelp 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 Yelp and Baidu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Yelp Inc and Baidu Inc, you can compare the effects of market volatilities on Yelp 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 Yelp with a short position of Baidu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yelp and Baidu.
Diversification Opportunities for Yelp and Baidu
Excellent diversification
The 3 months correlation between Yelp and Baidu is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Yelp Inc and Baidu Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baidu Inc and Yelp 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 Yelp Inc 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 Yelp i.e., Yelp and Baidu go up and down completely randomly.
Pair Corralation between Yelp and Baidu
Given the investment horizon of 90 days Yelp Inc is expected to generate 0.68 times more return on investment than Baidu. However, Yelp Inc is 1.46 times less risky than Baidu. It trades about 0.04 of its potential returns per unit of risk. Baidu Inc is currently generating about -0.03 per unit of risk. If you would invest 3,064 in Yelp Inc on October 20, 2024 and sell it today you would earn a total of 1,006 from holding Yelp Inc or generate 32.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Yelp Inc vs. Baidu Inc
Performance |
| Timeline |
| Yelp Inc |
| Baidu Inc |
Yelp and Baidu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Yelp and Baidu
The main advantage of trading using opposite Yelp and Baidu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yelp 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 Yelp Inc 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. 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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