Correlation Between Oracle and Baidu

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

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

Diversification Opportunities for Oracle and Baidu

-0.11

Correlation Coefficient

Oracle  Baidu

Good diversification

The 3 months correlation between Oracle and Baidu is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Oracle and Baidu Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baidu Inc and Oracle 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 Oracle are associated (or correlated) with Baidu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baidu Inc has no effect on the direction of Oracle i.e., Oracle and Baidu go up and down completely randomly.

Pair Corralation between Oracle and Baidu

Given the investment horizon of 90 days Oracle is expected to under-perform the Baidu. In addition to that, Oracle is 1.2 times more volatile than Baidu Inc. It trades about -0.05 of its total potential returns per unit of risk. Baidu Inc is currently generating about 0.07 per unit of volatility. If you would invest  8,230  in Baidu Inc on December 28, 2024 and sell it today you would earn a total of  880.00  from holding Baidu Inc or generate 10.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Oracle  vs.  Baidu Inc

Oracle

Risk-Adjusted Performance

Very Weak

Over the last 90 days Oracle has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Baidu Inc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Baidu Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Baidu may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Oracle and Baidu

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

The idea behind Oracle and Baidu Inc 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.