Correlation Between Alphabet and IQIYI

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

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

Diversification Opportunities for Alphabet and IQIYI

0.01

Correlation Coefficient

Alphabet  IQIYI

Significant diversification

The 3 months correlation between Alphabet and IQIYI is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and iQIYI Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iQIYI Inc and Alphabet 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 Alphabet Inc Class C 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 Alphabet i.e., Alphabet and IQIYI go up and down completely randomly.

Pair Corralation between Alphabet and IQIYI

Given the investment horizon of 90 days Alphabet is expected to generate 1.11 times less return on investment than IQIYI. But when comparing it to its historical volatility, Alphabet Inc Class C is 3.02 times less risky than IQIYI. It trades about 0.22 of its potential returns per unit of risk. iQIYI Inc is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  197.00  in iQIYI Inc on September 13, 2024 and sell it today you would earn a total of  38.00  from holding iQIYI Inc or generate 19.29% return on investment over 90 days.

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

Alphabet Inc Class C  vs.  iQIYI Inc

Alphabet Class C

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, Alphabet reported solid returns over the last few months and may actually be approaching a breakup point.

iQIYI Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iQIYI Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, IQIYI reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alphabet and IQIYI

The main advantage of trading using opposite Alphabet and IQIYI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet 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 Alphabet Inc Class C 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.