Correlation Between Allstar Health and Alibaba Health

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

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

Diversification Opportunities for Allstar Health and Alibaba Health

0.14

Correlation Coefficient

Allstar Health  Alibaba Health

Average diversification

The 3 months correlation between Allstar and Alibaba is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Allstar Health Brands and Alibaba Health Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alibaba Health Infor and Allstar Health 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 Allstar Health Brands are associated (or correlated) with Alibaba Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alibaba Health Infor has no effect on the direction of Allstar Health i.e., Allstar Health and Alibaba Health go up and down completely randomly.

Pair Corralation between Allstar Health and Alibaba Health

Given the investment horizon of 90 days Allstar Health Brands is expected to under-perform the Alibaba Health. In addition to that, Allstar Health is 2.11 times more volatile than Alibaba Health Information. It trades about 0.0 of its total potential returns per unit of risk. Alibaba Health Information is currently generating about 0.14 per unit of volatility. If you would invest  872.00  in Alibaba Health Information on December 30, 2024 and sell it today you would earn a total of  413.00  from holding Alibaba Health Information or generate 47.36% return on investment over 90 days.

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

Allstar Health Brands  vs.  Alibaba Health Information

Allstar Health Brands

Risk-Adjusted Performance

Very Weak

Over the last 90 days Allstar Health Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Allstar Health is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Alibaba Health Infor

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alibaba Health Information are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, Alibaba Health showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Allstar Health and Alibaba Health

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

The idea behind Allstar Health Brands and Alibaba Health Information 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.