Correlation Between IQIYI and Meta Platforms

Can any of the company-specific risk be diversified away by investing in both IQIYI and Meta Platforms 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 IQIYI and Meta Platforms into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iQIYI Inc and Meta Platforms, you can compare the effects of market volatilities on IQIYI and Meta Platforms 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 IQIYI with a short position of Meta Platforms. Check out your portfolio center. Please also check ongoing floating volatility patterns of IQIYI and Meta Platforms.

Diversification Opportunities for IQIYI and Meta Platforms

-0.18

Correlation Coefficient

IQIYI  Meta Platforms

Good diversification

The 3 months correlation between IQIYI and Meta is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding iQIYI Inc and Meta Platforms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meta Platforms and IQIYI 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 iQIYI Inc are associated (or correlated) with Meta Platforms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meta Platforms has no effect on the direction of IQIYI i.e., IQIYI and Meta Platforms go up and down completely randomly.

Pair Corralation between IQIYI and Meta Platforms

Allowing for the 90-day total investment horizon iQIYI Inc is expected to generate 1.42 times more return on investment than Meta Platforms. However, IQIYI is 1.42 times more volatile than Meta Platforms. It trades about 0.04 of its potential returns per unit of risk. Meta Platforms is currently generating about -0.13 per unit of risk. If you would invest  321.00  in iQIYI Inc on January 26, 2024 and sell it today you would earn a total of  161.00  from holding iQIYI Inc or generate 50.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	7.29%
Values	Daily Returns

iQIYI Inc  vs.  Meta Platforms

iQIYI Inc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iQIYI Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, IQIYI reported solid returns over the last few months and may actually be approaching a breakup point.

Meta Platforms

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Meta Platforms has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Meta Platforms is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IQIYI and Meta Platforms

The main advantage of trading using opposite IQIYI and Meta Platforms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IQIYI position performs unexpectedly, Meta Platforms 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 Meta Platforms will offset losses from the drop in Meta Platforms' long position.

The idea behind iQIYI Inc and Meta Platforms 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.