Correlation Between Baidu and NetApp

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Can any of the company-specific risk be diversified away by investing in both Baidu and NetApp 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 NetApp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Baidu Inc and NetApp Inc, you can compare the effects of market volatilities on Baidu and NetApp 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 NetApp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baidu and NetApp.

Diversification Opportunities for Baidu and NetApp

-0.53
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Baidu and NetApp is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Baidu Inc and NetApp Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetApp 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 NetApp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NetApp Inc has no effect on the direction of Baidu i.e., Baidu and NetApp go up and down completely randomly.

Pair Corralation between Baidu and NetApp

Given the investment horizon of 90 days Baidu Inc is expected to under-perform the NetApp. But the stock apears to be less risky and, when comparing its historical volatility, Baidu Inc is 1.27 times less risky than NetApp. The stock trades about -0.01 of its potential returns per unit of risk. The NetApp Inc is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  8,849  in NetApp Inc on December 29, 2023 and sell it today you would earn a total of  1,673  from holding NetApp Inc or generate 18.91% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Baidu Inc  vs.  NetApp Inc

 Performance 
       Timeline  
Baidu Inc 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
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 latest inconsistent performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.
NetApp Inc 

Risk-Adjusted Performance

9 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in NetApp Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, NetApp reported solid returns over the last few months and may actually be approaching a breakup point.

Baidu and NetApp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Baidu and NetApp

The main advantage of trading using opposite Baidu and NetApp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baidu position performs unexpectedly, NetApp 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 NetApp will offset losses from the drop in NetApp's long position.
The idea behind Baidu Inc and NetApp 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.

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