Correlation Between IQIYI and Alphabet

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

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

Diversification Opportunities for IQIYI and Alphabet

0.06

Correlation Coefficient

IQIYI  Alphabet

Significant diversification

The 3 months correlation between IQIYI and Alphabet is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding iQIYI Inc and Alphabet Inc Class C in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alphabet Class C 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 Alphabet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alphabet Class C has no effect on the direction of IQIYI i.e., IQIYI and Alphabet go up and down completely randomly.

Pair Corralation between IQIYI and Alphabet

Allowing for the 90-day total investment horizon iQIYI Inc is expected to generate 3.26 times more return on investment than Alphabet. However, IQIYI is 3.26 times more volatile than Alphabet Inc Class C. It trades about 0.08 of its potential returns per unit of risk. Alphabet Inc Class C is currently generating about 0.2 per unit of risk. If you would invest  199.00  in iQIYI Inc on September 12, 2024 and sell it today you would earn a total of  36.00  from holding iQIYI Inc or generate 18.09% return on investment over 90 days.

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

iQIYI Inc  vs.  Alphabet Inc Class C

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.

Alphabet Class C

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 15 (%) 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.

Pair Trading with IQIYI and Alphabet

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

The idea behind iQIYI Inc and Alphabet Inc Class C 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.