Correlation Between Baidu and Genius Sports

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

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

Diversification Opportunities for Baidu and Genius Sports

0.54

Correlation Coefficient

Baidu  Genius Sports

Very weak diversification

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

Pair Corralation between Baidu and Genius Sports

Given the investment horizon of 90 days Baidu is expected to generate 1.48 times less return on investment than Genius Sports. But when comparing it to its historical volatility, Baidu Inc is 1.1 times less risky than Genius Sports. It trades about 0.07 of its potential returns per unit of risk. Genius Sports is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  862.00  in Genius Sports on December 28, 2024 and sell it today you would earn a total of  153.00  from holding Genius Sports or generate 17.75% 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.  Genius Sports

Baidu Inc

Risk-Adjusted Performance

OK

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. In spite of comparatively unsteady fundamental indicators, Baidu unveiled solid returns over the last few months and may actually be approaching a breakup point.

Genius Sports

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Genius Sports are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Genius Sports demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Baidu and Genius Sports

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

The idea behind Baidu Inc and Genius Sports 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.