Correlation Between Weibo Corp and Baidu

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

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

Diversification Opportunities for Weibo Corp and Baidu

0.94

Correlation Coefficient

Weibo Corp  Baidu

Almost no diversification

The 3 months correlation between Weibo and Baidu is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Weibo Corp and Baidu Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baidu Inc and Weibo Corp 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 Weibo Corp 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 Weibo Corp i.e., Weibo Corp and Baidu go up and down completely randomly.

Pair Corralation between Weibo Corp and Baidu

Allowing for the 90-day total investment horizon Weibo Corp is expected to generate 1.38 times more return on investment than Baidu. However, Weibo Corp is 1.38 times more volatile than Baidu Inc. It trades about 0.04 of its potential returns per unit of risk. Baidu Inc is currently generating about 0.01 per unit of risk. If you would invest  792.00  in Weibo Corp on August 15, 2024 and sell it today you would earn a total of  35.00  from holding Weibo Corp or generate 4.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Weibo Corp  vs.  Baidu Inc

Weibo Corp

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Weibo Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental drivers, Weibo Corp may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Baidu Inc

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Baidu Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Baidu is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Weibo Corp and Baidu

The main advantage of trading using opposite Weibo Corp and Baidu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Weibo Corp 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 Weibo Corp 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.

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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.