Correlation Between Baidu and ANGI Homeservices

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

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

Diversification Opportunities for Baidu and ANGI Homeservices

0.54

Correlation Coefficient

Baidu  ANGI Homeservices

Very weak diversification

The 3 months correlation between Baidu and ANGI is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Baidu Inc and ANGI Homeservices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ANGI Homeservices 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 ANGI Homeservices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ANGI Homeservices has no effect on the direction of Baidu i.e., Baidu and ANGI Homeservices go up and down completely randomly.

Pair Corralation between Baidu and ANGI Homeservices

Given the investment horizon of 90 days Baidu Inc is expected to generate 0.85 times more return on investment than ANGI Homeservices. However, Baidu Inc is 1.18 times less risky than ANGI Homeservices. It trades about 0.14 of its potential returns per unit of risk. ANGI Homeservices is currently generating about -0.26 per unit of risk. If you would invest  8,033  in Baidu Inc on September 23, 2024 and sell it today you would earn a total of  547.00  from holding Baidu Inc or generate 6.81% return on investment over 90 days.

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

Baidu Inc  vs.  ANGI Homeservices

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. In spite of comparatively stable fundamental indicators, Baidu is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

ANGI Homeservices

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ANGI Homeservices has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Baidu and ANGI Homeservices

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

The idea behind Baidu Inc and ANGI Homeservices 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.