Correlation Between Baidu and Zedge

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

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

Diversification Opportunities for Baidu and Zedge

0.8

Correlation Coefficient

Baidu  Zedge

Very poor diversification

The 3 months correlation between Baidu and Zedge is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Baidu Inc and Zedge Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zedge 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 Zedge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zedge Inc has no effect on the direction of Baidu i.e., Baidu and Zedge go up and down completely randomly.

Pair Corralation between Baidu and Zedge

Given the investment horizon of 90 days Baidu Inc is expected to generate 0.66 times more return on investment than Zedge. However, Baidu Inc is 1.5 times less risky than Zedge. It trades about 0.0 of its potential returns per unit of risk. Zedge Inc is currently generating about -0.09 per unit of risk. If you would invest  8,828  in Baidu Inc on September 22, 2024 and sell it today you would lose (248.00) from holding Baidu Inc or give up 2.81% of portfolio value over 90 days.

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

Baidu Inc  vs.  Zedge 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.

Zedge Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zedge Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Baidu and Zedge

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

The idea behind Baidu Inc and Zedge 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.