Correlation Between Bilibili and SohuCom

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

By analyzing existing cross correlation between Bilibili and SohuCom, you can compare the effects of market volatilities on Bilibili and SohuCom 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 Bilibili with a short position of SohuCom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bilibili and SohuCom.

Diversification Opportunities for Bilibili and SohuCom

0.74

Correlation Coefficient

Bilibili  SohuCom

Poor diversification

The 3 months correlation between Bilibili and SohuCom is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Bilibili and SohuCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SohuCom and Bilibili 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 Bilibili are associated (or correlated) with SohuCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SohuCom has no effect on the direction of Bilibili i.e., Bilibili and SohuCom go up and down completely randomly.

Pair Corralation between Bilibili and SohuCom

Given the investment horizon of 90 days Bilibili is expected to generate 1.56 times more return on investment than SohuCom. However, Bilibili is 1.56 times more volatile than SohuCom. It trades about 0.04 of its potential returns per unit of risk. SohuCom is currently generating about 0.01 per unit of risk. If you would invest  1,840  in Bilibili on December 30, 2024 and sell it today you would earn a total of  82.00  from holding Bilibili or generate 4.46% return on investment over 90 days.

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

Bilibili  vs.  SohuCom

Bilibili

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bilibili are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak essential indicators, Bilibili may actually be approaching a critical reversion point that can send shares even higher in April 2025.

SohuCom

Risk-Adjusted Performance

Very Weak

Over the last 90 days SohuCom has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical indicators, SohuCom is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Bilibili and SohuCom

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

The idea behind Bilibili and SohuCom 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.