Correlation Between Alibaba Group and Intel

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

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

Diversification Opportunities for Alibaba Group and Intel

0.61

Correlation Coefficient

Alibaba Group  Intel

Poor diversification

The 3 months correlation between Alibaba and Intel is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and Intel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intel and Alibaba 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 Alibaba Group Holding are associated (or correlated) with Intel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intel has no effect on the direction of Alibaba Group i.e., Alibaba Group and Intel go up and down completely randomly.

Pair Corralation between Alibaba Group and Intel

Assuming the 90 days horizon Alibaba Group Holding is expected to generate 0.87 times more return on investment than Intel. However, Alibaba Group Holding is 1.14 times less risky than Intel. It trades about 0.21 of its potential returns per unit of risk. Intel is currently generating about 0.07 per unit of risk. If you would invest  1,028  in Alibaba Group Holding on December 29, 2024 and sell it today you would earn a total of  558.00  from holding Alibaba Group Holding or generate 54.28% return on investment over 90 days.

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

Alibaba Group Holding  vs.  Intel

Alibaba Group Holding

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alibaba Group Holding are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Alibaba Group reported solid returns over the last few months and may actually be approaching a breakup point.

Intel

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Intel are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Intel unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alibaba Group and Intel

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

The idea behind Alibaba Group Holding and Intel 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 Transaction History module to view history of all your transactions and understand their impact on performance.