Correlation Between Twilio and Baidu

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

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

Diversification Opportunities for Twilio and Baidu

0.48

Correlation Coefficient

Twilio  Baidu

Very weak diversification

The 3 months correlation between Twilio and Baidu is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Twilio Inc and Baidu Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baidu Inc and Twilio 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 Twilio Inc 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 Twilio i.e., Twilio and Baidu go up and down completely randomly.

Pair Corralation between Twilio and Baidu

Given the investment horizon of 90 days Twilio Inc is expected to generate 1.31 times more return on investment than Baidu. However, Twilio is 1.31 times more volatile than Baidu Inc. It trades about 0.07 of its potential returns per unit of risk. Baidu Inc is currently generating about 0.04 per unit of risk. If you would invest  10,291  in Twilio Inc on November 27, 2024 and sell it today you would earn a total of  1,237  from holding Twilio Inc or generate 12.02% return on investment over 90 days.

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

Twilio Inc  vs.  Baidu Inc

Twilio Inc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Twilio Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak essential indicators, Twilio displayed solid returns over the last few months and may actually be approaching a breakup point.

Baidu Inc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Baidu Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady fundamental indicators, Baidu may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Twilio and Baidu

The main advantage of trading using opposite Twilio and Baidu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Twilio 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 Twilio Inc 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.