Correlation Between IQIYI and Great Wall

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

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

Diversification Opportunities for IQIYI and Great Wall

0.66

Correlation Coefficient

IQIYI  Great Wall

Poor diversification

The 3 months correlation between IQIYI and Great is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding iQIYI Inc and Great Wall Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great Wall Motor 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 Great Wall. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great Wall Motor has no effect on the direction of IQIYI i.e., IQIYI and Great Wall go up and down completely randomly.

Pair Corralation between IQIYI and Great Wall

Allowing for the 90-day total investment horizon iQIYI Inc is expected to under-perform the Great Wall. But the stock apears to be less risky and, when comparing its historical volatility, iQIYI Inc is 1.13 times less risky than Great Wall. The stock trades about -0.02 of its potential returns per unit of risk. The Great Wall Motor is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,876  in Great Wall Motor on September 13, 2024 and sell it today you would lose (36.00) from holding Great Wall Motor or give up 1.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.67%
Values	Daily Returns

iQIYI Inc  vs.  Great Wall Motor

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.

Great Wall Motor

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Great Wall Motor are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Great Wall showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IQIYI and Great Wall

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

The idea behind iQIYI Inc and Great Wall Motor 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.