Correlation Between Alphabet and IQIYI

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

Diversification Opportunities for Alphabet and IQIYI

-0.27
  Correlation Coefficient

Very good diversification

The 3 months correlation between Alphabet and IQIYI is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Class C and IQIYI Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IQIYI Inc and Alphabet 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 Alphabet Class C 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 Alphabet i.e., Alphabet and IQIYI go up and down completely randomly.

Pair Corralation between Alphabet and IQIYI

Given the investment horizon of 90 days Alphabet is expected to generate 1.26 times less return on investment than IQIYI. But when comparing it to its historical volatility, Alphabet Class C is 2.09 times less risky than IQIYI. It trades about 0.23 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 Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Alphabet Class C  vs.  IQIYI Inc

 Performance 
       Timeline  
Alphabet Class C 

Risk-Adjusted Performance

6 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Class C are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Alphabet may actually be approaching a critical reversion point that can send shares even higher in April 2024.
IQIYI Inc 

Risk-Adjusted Performance

0 of 100

 
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.

Alphabet and IQIYI Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Alphabet and IQIYI

The main advantage of trading using opposite Alphabet and IQIYI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet 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 Alphabet Class C 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.
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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