Correlation Between Steel Connect and IQIYI

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

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

Diversification Opportunities for Steel Connect and IQIYI

-0.67

Correlation Coefficient

Steel Connect  IQIYI

Excellent diversification

The 3 months correlation between Steel and IQIYI is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Steel Connect and iQIYI Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iQIYI Inc and Steel Connect 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 Steel Connect are associated (or correlated) with IQIYI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iQIYI Inc has no effect on the direction of Steel Connect i.e., Steel Connect and IQIYI go up and down completely randomly.

Pair Corralation between Steel Connect and IQIYI

Given the investment horizon of 90 days Steel Connect is expected to under-perform the IQIYI. But the stock apears to be less risky and, when comparing its historical volatility, Steel Connect is 2.62 times less risky than IQIYI. The stock trades about -0.34 of its potential returns per unit of risk. The iQIYI Inc is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  205.00  in iQIYI Inc on October 21, 2024 and sell it today you would lose (11.00) from holding iQIYI Inc or give up 5.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	47.37%
Values	Daily Returns

Steel Connect  vs.  iQIYI Inc

Steel Connect

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Steel Connect has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very uncertain fundamental indicators, Steel Connect displayed solid returns over the last few months and may actually be approaching a breakup point.

iQIYI Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iQIYI Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Steel Connect and IQIYI

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

The idea behind Steel Connect and iQIYI 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.