Correlation Between Baidu and Zillow

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

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

Diversification Opportunities for Baidu and Zillow

-0.59

Correlation Coefficient

Baidu  Zillow

Excellent diversification

The 3 months correlation between Baidu and Zillow is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Baidu Inc and Zillow Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zillow Group 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 Zillow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zillow Group has no effect on the direction of Baidu i.e., Baidu and Zillow go up and down completely randomly.

Pair Corralation between Baidu and Zillow

Given the investment horizon of 90 days Baidu Inc is expected to under-perform the Zillow. But the stock apears to be less risky and, when comparing its historical volatility, Baidu Inc is 1.4 times less risky than Zillow. The stock trades about -0.07 of its potential returns per unit of risk. The Zillow Group is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  6,353  in Zillow Group on September 26, 2024 and sell it today you would earn a total of  985.00  from holding Zillow Group or generate 15.5% return on investment over 90 days.

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

Baidu Inc  vs.  Zillow Group

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 unsteady performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Zillow Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zillow Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent technical and fundamental indicators, Zillow reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Baidu and Zillow

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

The idea behind Baidu Inc and Zillow Group 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.