Correlation Between Grupo Sports and Baidu

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

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

Diversification Opportunities for Grupo Sports and Baidu

-0.61

Correlation Coefficient

Grupo Sports  Baidu

Excellent diversification

The 3 months correlation between Grupo and Baidu is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Sports World and Baidu Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baidu Inc and Grupo Sports 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 Grupo Sports World 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 Grupo Sports i.e., Grupo Sports and Baidu go up and down completely randomly.

Pair Corralation between Grupo Sports and Baidu

Assuming the 90 days trading horizon Grupo Sports World is expected to under-perform the Baidu. But the stock apears to be less risky and, when comparing its historical volatility, Grupo Sports World is 18.66 times less risky than Baidu. The stock trades about -0.1 of its potential returns per unit of risk. The Baidu Inc is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  167,645  in Baidu Inc on September 25, 2024 and sell it today you would earn a total of  7,355  from holding Baidu Inc or generate 4.39% return on investment over 90 days.

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

Grupo Sports World  vs.  Baidu Inc

Grupo Sports World

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Sports World are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Grupo Sports sustained solid returns over the last few months and may actually be approaching a breakup point.

Baidu Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Baidu Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Baidu is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Grupo Sports and Baidu

The main advantage of trading using opposite Grupo Sports and Baidu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grupo Sports 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 Grupo Sports World 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.