Correlation Between Baidu and Arena Group

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

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

Diversification Opportunities for Baidu and Arena Group

0.56

Correlation Coefficient

Baidu  Arena Group

Very weak diversification

The 3 months correlation between Baidu and Arena is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Baidu Inc and Arena Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arena Group Holdings 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 Arena Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arena Group Holdings has no effect on the direction of Baidu i.e., Baidu and Arena Group go up and down completely randomly.

Pair Corralation between Baidu and Arena Group

Given the investment horizon of 90 days Baidu is expected to generate 1.5 times less return on investment than Arena Group. But when comparing it to its historical volatility, Baidu Inc is 1.69 times less risky than Arena Group. It trades about 0.1 of its potential returns per unit of risk. Arena Group Holdings is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  141.00  in Arena Group Holdings on December 28, 2024 and sell it today you would earn a total of  31.00  from holding Arena Group Holdings or generate 21.99% 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.  Arena Group Holdings

Baidu Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Baidu Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental indicators, Baidu unveiled solid returns over the last few months and may actually be approaching a breakup point.

Arena Group Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Arena Group Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent technical and fundamental indicators, Arena Group displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Baidu and Arena Group

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

The idea behind Baidu Inc and Arena Group Holdings 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.