Correlation Between Baidu and DoorDash

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

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

Diversification Opportunities for Baidu and DoorDash

-0.32

Correlation Coefficient

Baidu  DoorDash

Very good diversification

The 3 months correlation between Baidu and DoorDash is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Baidu Inc and DoorDash Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DoorDash Class A 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 DoorDash. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DoorDash Class A has no effect on the direction of Baidu i.e., Baidu and DoorDash go up and down completely randomly.

Pair Corralation between Baidu and DoorDash

Given the investment horizon of 90 days Baidu is expected to generate 183.63 times less return on investment than DoorDash. But when comparing it to its historical volatility, Baidu Inc is 1.14 times less risky than DoorDash. It trades about 0.0 of its potential returns per unit of risk. DoorDash Class A is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  8,739  in DoorDash Class A on January 18, 2024 and sell it today you would earn a total of  4,351  from holding DoorDash Class A or generate 49.79% 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.  DoorDash Class A

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.

DoorDash Class A

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DoorDash Class A are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, DoorDash demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Baidu and DoorDash

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

The idea behind Baidu Inc and DoorDash Class A 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.