Correlation Between IQIYI and Liberty Media

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

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

Diversification Opportunities for IQIYI and Liberty Media

-0.4

Correlation Coefficient

IQIYI  Liberty Media

Very good diversification

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

Pair Corralation between IQIYI and Liberty Media

Allowing for the 90-day total investment horizon iQIYI Inc is expected to under-perform the Liberty Media. In addition to that, IQIYI is 2.27 times more volatile than Liberty Media. It trades about -0.02 of its total potential returns per unit of risk. Liberty Media is currently generating about 0.23 per unit of volatility. If you would invest  7,969  in Liberty Media on September 16, 2024 and sell it today you would earn a total of  1,540  from holding Liberty Media or generate 19.32% return on investment over 90 days.

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

iQIYI Inc  vs.  Liberty Media

iQIYI Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iQIYI Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, IQIYI reported solid returns over the last few months and may actually be approaching a breakup point.

Liberty Media

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Media are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Liberty Media disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IQIYI and Liberty Media

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

The idea behind iQIYI Inc and Liberty Media 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.