Correlation Between Baidu and MediaAlpha

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

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

Diversification Opportunities for Baidu and MediaAlpha

0.41

Correlation Coefficient

Baidu  MediaAlpha

Very weak diversification

The 3 months correlation between Baidu and MediaAlpha is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Baidu Inc and MediaAlpha in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MediaAlpha 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 MediaAlpha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MediaAlpha has no effect on the direction of Baidu i.e., Baidu and MediaAlpha go up and down completely randomly.

Pair Corralation between Baidu and MediaAlpha

Assuming the 90 days horizon Baidu Inc is expected to generate 1.57 times more return on investment than MediaAlpha. However, Baidu is 1.57 times more volatile than MediaAlpha. It trades about 0.0 of its potential returns per unit of risk. MediaAlpha is currently generating about -0.07 per unit of risk. If you would invest  1,182  in Baidu Inc on September 3, 2024 and sell it today you would lose (182.00) from holding Baidu Inc or give up 15.4% of portfolio value over 90 days.

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

Baidu Inc  vs.  MediaAlpha

Baidu Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Baidu Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Baidu is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

MediaAlpha

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MediaAlpha has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Baidu and MediaAlpha

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

The idea behind Baidu Inc and MediaAlpha 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.