Correlation Between Digital Locations and IQIYI

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

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

Diversification Opportunities for Digital Locations and IQIYI

-0.56

Correlation Coefficient

Digital Locations  IQIYI

Excellent diversification

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

Pair Corralation between Digital Locations and IQIYI

Given the investment horizon of 90 days Digital Locations is expected to under-perform the IQIYI. In addition to that, Digital Locations is 3.21 times more volatile than iQIYI Inc. It trades about -0.09 of its total potential returns per unit of risk. iQIYI Inc is currently generating about 0.04 per unit of volatility. If you would invest  208.00  in iQIYI Inc on December 27, 2024 and sell it today you would earn a total of  13.00  from holding iQIYI Inc or generate 6.25% return on investment over 90 days.

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

Digital Locations  vs.  iQIYI Inc

Digital Locations

Risk-Adjusted Performance

Very Weak

Over the last 90 days Digital Locations has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

iQIYI Inc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iQIYI Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, IQIYI may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Digital Locations and IQIYI

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

The idea behind Digital Locations and iQIYI Inc 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.