A lot of fundamental analysis on GOOG recently since they’ve decided to bail on China. Stories on how MSFT’s Bing and BIDU might grow faster with GOOG now out of the way in China.
As you can see from the chart above, BIDU (blue line) has outperformed GOOG (red line) since early 2006 had you made the trade or investment at that time.
Besides outright trades, professional traders can trade the equity spread pairs trade to gauge the relative outperformance of one over the other.
In this case, you could go long BIDU and short GOOG at the same time. As of today’s close, BIDU was up $13.62 and GOOG up $8.33 on the day.
The volatility for BIDU is $16.10 or 2.62% and it’s $11.33 or 2% for GOOG despite the differences in share prices.
This trade is not over by a long shot. Like with commodity spreads, all you need is GOOG to do is go down more than BIDU, or BIDU to increase more than GOOG to make money. Of course, you can lose by having both go against you. Proceed at your own risk.