Correlation Between Warner Bros and IQIYI

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

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

Diversification Opportunities for Warner Bros and IQIYI

0.28

Correlation Coefficient

Warner Bros  IQIYI

Modest diversification

The 3 months correlation between Warner and IQIYI is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Warner Bros Discovery and iQIYI Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iQIYI Inc and Warner Bros 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 Warner Bros Discovery 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 Warner Bros i.e., Warner Bros and IQIYI go up and down completely randomly.

Pair Corralation between Warner Bros and IQIYI

Considering the 90-day investment horizon Warner Bros is expected to generate 1.96 times less return on investment than IQIYI. But when comparing it to its historical volatility, Warner Bros Discovery is 1.66 times less risky than IQIYI. It trades about 0.04 of its potential returns per unit of risk. iQIYI Inc is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  208.00  in iQIYI Inc on December 27, 2024 and sell it today you would earn a total of  13.00  from holding iQIYI Inc or generate 6.25% return on investment over 90 days.

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

Warner Bros Discovery  vs.  iQIYI Inc

Warner Bros Discovery

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Warner Bros Discovery are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, Warner Bros is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

iQIYI Inc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iQIYI Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, IQIYI may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Warner Bros and IQIYI

The main advantage of trading using opposite Warner Bros and IQIYI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Bros 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 Warner Bros Discovery 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.