Correlation Between AIRBNB INC and Baidu

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

By analyzing existing cross correlation between AIRBNB INC DL 01 and Baidu Inc, you can compare the effects of market volatilities on AIRBNB INC 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 AIRBNB INC with a short position of Baidu. Check out your portfolio center. Please also check ongoing floating volatility patterns of AIRBNB INC and Baidu.

Diversification Opportunities for AIRBNB INC and Baidu

-0.64

Correlation Coefficient

AIRBNB INC  Baidu

Excellent diversification

The 3 months correlation between AIRBNB and Baidu is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding AIRBNB INC DL 01 and Baidu Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baidu Inc and AIRBNB INC 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 AIRBNB INC DL 01 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 AIRBNB INC i.e., AIRBNB INC and Baidu go up and down completely randomly.

Pair Corralation between AIRBNB INC and Baidu

Assuming the 90 days horizon AIRBNB INC DL 01 is expected to generate 0.8 times more return on investment than Baidu. However, AIRBNB INC DL 01 is 1.26 times less risky than Baidu. It trades about 0.1 of its potential returns per unit of risk. Baidu Inc is currently generating about -0.06 per unit of risk. If you would invest  11,302  in AIRBNB INC DL 01 on September 29, 2024 and sell it today you would earn a total of  1,484  from holding AIRBNB INC DL 01 or generate 13.13% return on investment over 90 days.

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

AIRBNB INC DL 01  vs.  Baidu Inc

AIRBNB INC DL

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AIRBNB INC DL 01 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AIRBNB INC reported 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. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with AIRBNB INC and Baidu

The main advantage of trading using opposite AIRBNB INC and Baidu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AIRBNB INC 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 AIRBNB INC DL 01 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.