Correlation Between Baidu and Kanzhun

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

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

Diversification Opportunities for Baidu and Kanzhun

0.95

Correlation Coefficient

Baidu  Kanzhun

Almost no diversification

The 3 months correlation between Baidu and Kanzhun is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Baidu Inc and Kanzhun Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kanzhun Ltd ADR and Baidu 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 Baidu Inc are associated (or correlated) with Kanzhun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kanzhun Ltd ADR has no effect on the direction of Baidu i.e., Baidu and Kanzhun go up and down completely randomly.

Pair Corralation between Baidu and Kanzhun

Given the investment horizon of 90 days Baidu Inc is expected to under-perform the Kanzhun. But the stock apears to be less risky and, when comparing its historical volatility, Baidu Inc is 1.47 times less risky than Kanzhun. The stock trades about -0.02 of its potential returns per unit of risk. The Kanzhun Ltd ADR is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,522  in Kanzhun Ltd ADR on September 13, 2024 and sell it today you would lose (73.00) from holding Kanzhun Ltd ADR or give up 4.8% of portfolio value over 90 days.

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

Baidu Inc  vs.  Kanzhun Ltd ADR

Baidu Inc

Risk-Adjusted Performance

3 of 100

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 January 2025.

Kanzhun Ltd ADR

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kanzhun Ltd ADR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Kanzhun showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Baidu and Kanzhun

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

The idea behind Baidu Inc and Kanzhun Ltd ADR 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.