Correlation Between Gaia and IQIYI
Can any of the company-specific risk be diversified away by investing in both Gaia and IQIYI 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 Gaia and IQIYI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gaia Inc and iQIYI Inc, you can compare the effects of market volatilities on Gaia and IQIYI 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 Gaia with a short position of IQIYI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gaia and IQIYI.
Diversification Opportunities for Gaia and IQIYI
Poor diversification
The 3 months correlation between Gaia and IQIYI is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Gaia Inc and iQIYI Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iQIYI Inc and Gaia 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 Gaia Inc are associated (or correlated) with IQIYI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iQIYI Inc has no effect on the direction of Gaia i.e., Gaia and IQIYI go up and down completely randomly.
Pair Corralation between Gaia and IQIYI
Given the investment horizon of 90 days Gaia Inc is expected to generate 1.76 times more return on investment than IQIYI. However, Gaia is 1.76 times more volatile than iQIYI Inc. It trades about 0.27 of its potential returns per unit of risk. iQIYI Inc is currently generating about 0.02 per unit of risk. If you would invest 297.00 in Gaia Inc on January 20, 2024 and sell it today you would earn a total of 82.00 from holding Gaia Inc or generate 27.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Gaia Inc vs. iQIYI Inc
Performance |
| Timeline |
| Gaia Inc |
| iQIYI Inc |
Gaia and IQIYI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gaia and IQIYI
The main advantage of trading using opposite Gaia and IQIYI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gaia position performs unexpectedly, IQIYI 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 IQIYI will offset losses from the drop in IQIYI's long position.The idea behind Gaia Inc and iQIYI 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.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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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