Correlation Between IQIYI and Charter Communications

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

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

Diversification Opportunities for IQIYI and Charter Communications

0.21

Correlation Coefficient

IQIYI  Charter Communications

Modest diversification

The 3 months correlation between IQIYI and Charter is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding iQIYI Inc and Charter Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charter Communications 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 Charter Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charter Communications has no effect on the direction of IQIYI i.e., IQIYI and Charter Communications go up and down completely randomly.

Pair Corralation between IQIYI and Charter Communications

Allowing for the 90-day total investment horizon iQIYI Inc is expected to generate 2.08 times more return on investment than Charter Communications. However, IQIYI is 2.08 times more volatile than Charter Communications. It trades about 0.01 of its potential returns per unit of risk. Charter Communications is currently generating about -0.07 per unit of risk. If you would invest  216.00  in iQIYI Inc on November 28, 2024 and sell it today you would lose (6.00) from holding iQIYI Inc or give up 2.78% of portfolio value over 90 days.

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

iQIYI Inc  vs.  Charter Communications

iQIYI Inc

Risk-Adjusted Performance

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.

Charter Communications

Risk-Adjusted Performance

Very Weak

Over the last 90 days Charter Communications has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest uncertain performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with IQIYI and Charter Communications

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

The idea behind iQIYI Inc and Charter Communications 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.