Correlation Between Baidu and Hello

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

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

Diversification Opportunities for Baidu and Hello

0.04

Correlation Coefficient

Baidu  Hello

Significant diversification

The 3 months correlation between Baidu and Hello is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Baidu Inc and Hello Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hello Group 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 Hello. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hello Group has no effect on the direction of Baidu i.e., Baidu and Hello go up and down completely randomly.

Pair Corralation between Baidu and Hello

Given the investment horizon of 90 days Baidu Inc is expected to generate 1.13 times more return on investment than Hello. However, Baidu is 1.13 times more volatile than Hello Group. It trades about 0.1 of its potential returns per unit of risk. Hello Group is currently generating about -0.05 per unit of risk. If you would invest  8,405  in Baidu Inc on December 29, 2024 and sell it today you would earn a total of  1,437  from holding Baidu Inc or generate 17.1% return on investment over 90 days.

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

Baidu Inc  vs.  Hello Group

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

Hello Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hello Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Baidu and Hello

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

The idea behind Baidu Inc and Hello Group 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.