Correlation Between Gaming Leisure and IQIYI

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

Diversification Opportunities for Gaming Leisure and IQIYI

0.89
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Gaming and IQIYI is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Gaming Leisure Properties and IQIYI Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IQIYI Inc and Gaming Leisure 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 Gaming Leisure Properties are associated (or correlated) with IQIYI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IQIYI Inc has no effect on the direction of Gaming Leisure i.e., Gaming Leisure and IQIYI go up and down completely randomly.

Pair Corralation between Gaming Leisure and IQIYI

Given the investment horizon of 90 days Gaming Leisure is expected to generate 2.38 times less return on investment than IQIYI. But when comparing it to its historical volatility, Gaming Leisure Properties is 3.61 times less risky than IQIYI. It trades about 0.21 of its potential returns per unit of risk. IQIYI Inc is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  367.00  in IQIYI Inc on December 29, 2023 and sell it today you would earn a total of  36.00  from holding IQIYI Inc or generate 9.81% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Gaming Leisure Properties  vs.  IQIYI Inc

 Performance 
       Timeline  
Gaming Leisure Properties 

Risk-Adjusted Performance

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Very Weak
Over the last 90 days Gaming Leisure Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Gaming Leisure is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.
IQIYI Inc 

Risk-Adjusted Performance

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Low
 
High
Very Weak
Over the last 90 days IQIYI Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with abnormal performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Gaming Leisure and IQIYI Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Gaming Leisure and IQIYI

The main advantage of trading using opposite Gaming Leisure and IQIYI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gaming Leisure position performs unexpectedly, IQIYI 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 IQIYI will offset losses from the drop in IQIYI's long position.
The idea behind Gaming Leisure Properties and IQIYI 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.

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