Correlation Between Baidu and Etsy

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

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

Diversification Opportunities for Baidu and Etsy

-0.23

Correlation Coefficient

Baidu  Etsy

Very good diversification

The 3 months correlation between Baidu and Etsy is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Baidu Inc and Etsy Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Etsy Inc 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 Etsy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Etsy Inc has no effect on the direction of Baidu i.e., Baidu and Etsy go up and down completely randomly.

Pair Corralation between Baidu and Etsy

Given the investment horizon of 90 days Baidu is expected to generate 62.29 times less return on investment than Etsy. In addition to that, Baidu is 1.22 times more volatile than Etsy Inc. It trades about 0.0 of its total potential returns per unit of risk. Etsy Inc is currently generating about 0.03 per unit of volatility. If you would invest  5,483  in Etsy Inc on September 21, 2024 and sell it today you would earn a total of  198.00  from holding Etsy Inc or generate 3.61% return on investment over 90 days.

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

Baidu Inc  vs.  Etsy Inc

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. In spite of comparatively stable fundamental indicators, Baidu is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Etsy Inc

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Etsy Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Etsy is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Baidu and Etsy

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

The idea behind Baidu Inc and Etsy 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.