Correlation Between TrueCar and Baidu

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

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

Diversification Opportunities for TrueCar and Baidu

-0.2

Correlation Coefficient

TrueCar  Baidu

Good diversification

The 3 months correlation between TrueCar and Baidu is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding TrueCar and Baidu Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baidu Inc and TrueCar 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 TrueCar 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 TrueCar i.e., TrueCar and Baidu go up and down completely randomly.

Pair Corralation between TrueCar and Baidu

Given the investment horizon of 90 days TrueCar is expected to under-perform the Baidu. But the stock apears to be less risky and, when comparing its historical volatility, TrueCar is 1.65 times less risky than Baidu. The stock trades about -0.33 of its potential returns per unit of risk. The Baidu Inc is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,218  in Baidu Inc on December 29, 2024 and sell it today you would lose (43.00) from holding Baidu Inc or give up 3.53% of portfolio value over 90 days.

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

TrueCar  vs.  Baidu Inc

TrueCar

Risk-Adjusted Performance

Very Weak

Over the last 90 days TrueCar has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Baidu Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Baidu Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Baidu may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with TrueCar and Baidu

The main advantage of trading using opposite TrueCar and Baidu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TrueCar 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 TrueCar 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.