Correlation Between Baidu and Meituan

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

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

Diversification Opportunities for Baidu and Meituan

0.47

Correlation Coefficient

Baidu  Meituan

Very weak diversification

The 3 months correlation between Baidu and Meituan is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Baidu Inc and Meituan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meituan and Baidu 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 Baidu Inc are associated (or correlated) with Meituan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meituan has no effect on the direction of Baidu i.e., Baidu and Meituan go up and down completely randomly.

Pair Corralation between Baidu and Meituan

Assuming the 90 days horizon Baidu Inc is expected to generate 0.86 times more return on investment than Meituan. However, Baidu Inc is 1.16 times less risky than Meituan. It trades about 0.07 of its potential returns per unit of risk. Meituan is currently generating about 0.02 per unit of risk. If you would invest  8,230  in Baidu Inc on December 28, 2024 and sell it today you would earn a total of  880.00  from holding Baidu Inc or generate 10.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Baidu Inc  vs.  Meituan

Baidu Inc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Baidu Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Baidu may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Meituan

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Meituan are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Meituan is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Baidu and Meituan

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

The idea behind Baidu Inc and Meituan 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.