Correlation Between Arena Group and Baidu

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

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

Diversification Opportunities for Arena Group and Baidu

0.22

Correlation Coefficient

Arena Group  Baidu

Modest diversification

The 3 months correlation between Arena and Baidu is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Arena Group Holdings and Baidu Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baidu Inc and Arena Group 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 Arena Group Holdings are associated (or correlated) with Baidu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baidu Inc has no effect on the direction of Arena Group i.e., Arena Group and Baidu go up and down completely randomly.

Pair Corralation between Arena Group and Baidu

Given the investment horizon of 90 days Arena Group Holdings is expected to under-perform the Baidu. In addition to that, Arena Group is 3.23 times more volatile than Baidu Inc. It trades about -0.52 of its total potential returns per unit of risk. Baidu Inc is currently generating about -0.19 per unit of volatility. If you would invest  10,389  in Baidu Inc on January 20, 2024 and sell it today you would lose (831.00) from holding Baidu Inc or give up 8.0% of portfolio value over 90 days.

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

Arena Group Holdings  vs.  Baidu Inc

Arena Group Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arena Group Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Arena Group is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

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 recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Arena Group and Baidu

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

The idea behind Arena Group Holdings and Baidu 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.