Correlation Between Aluminumof China and Alibaba Group
Can any of the company-specific risk be diversified away by investing in both Aluminumof China and Alibaba Group 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 Aluminumof China and Alibaba Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aluminum of and Alibaba Group Holding, you can compare the effects of market volatilities on Aluminumof China and Alibaba Group 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 Aluminumof China with a short position of Alibaba Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aluminumof China and Alibaba Group.
Diversification Opportunities for Aluminumof China and Alibaba Group
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Aluminumof and Alibaba is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Aluminum of and Alibaba Group Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alibaba Group Holding and Aluminumof China 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 Aluminum of are associated (or correlated) with Alibaba Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alibaba Group Holding has no effect on the direction of Aluminumof China i.e., Aluminumof China and Alibaba Group go up and down completely randomly.
Pair Corralation between Aluminumof China and Alibaba Group
Assuming the 90 days horizon Aluminum of is expected to generate 1.3 times more return on investment than Alibaba Group. However, Aluminumof China is 1.3 times more volatile than Alibaba Group Holding. It trades about 0.08 of its potential returns per unit of risk. Alibaba Group Holding is currently generating about 0.05 per unit of risk. If you would invest 34.00 in Aluminum of on October 24, 2024 and sell it today you would earn a total of 26.00 from holding Aluminum of or generate 76.47% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 99.6% |
Values | Daily Returns |
Aluminum of vs. Alibaba Group Holding
Performance |
Timeline |
Aluminumof China |
Alibaba Group Holding |
Aluminumof China and Alibaba Group Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Aluminumof China and Alibaba Group
The main advantage of trading using opposite Aluminumof China and Alibaba Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aluminumof China position performs unexpectedly, Alibaba Group 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 Group will offset losses from the drop in Alibaba Group's long position.Aluminumof China vs. Harmony Gold Mining | Aluminumof China vs. THRACE PLASTICS | Aluminumof China vs. Vulcan Materials | Aluminumof China vs. Scandinavian Tobacco Group |
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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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