Correlation Between IQIYI and Ameren Illinois

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

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

Diversification Opportunities for IQIYI and Ameren Illinois

0.4

Correlation Coefficient

IQIYI  Ameren Illinois

Very weak diversification

The 3 months correlation between IQIYI and Ameren is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding iQIYI Inc and Ameren Illinois in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ameren Illinois and IQIYI 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 iQIYI Inc are associated (or correlated) with Ameren Illinois. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ameren Illinois has no effect on the direction of IQIYI i.e., IQIYI and Ameren Illinois go up and down completely randomly.

Pair Corralation between IQIYI and Ameren Illinois

Allowing for the 90-day total investment horizon iQIYI Inc is expected to generate 13.25 times more return on investment than Ameren Illinois. However, IQIYI is 13.25 times more volatile than Ameren Illinois. It trades about 0.05 of its potential returns per unit of risk. Ameren Illinois is currently generating about 0.15 per unit of risk. If you would invest  199.00  in iQIYI Inc on December 2, 2024 and sell it today you would earn a total of  9.00  from holding iQIYI Inc or generate 4.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.56%
Values	Daily Returns

iQIYI Inc  vs.  Ameren Illinois

iQIYI Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days iQIYI Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, IQIYI is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Ameren Illinois

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ameren Illinois has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Ameren Illinois is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IQIYI and Ameren Illinois

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

The idea behind iQIYI Inc and Ameren Illinois 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.