Correlation Between Aris Water and ALIBABA

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

By analyzing existing cross correlation between Aris Water Solutions and ALIBABA GROUP HLDG, you can compare the effects of market volatilities on Aris Water and ALIBABA 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 Aris Water with a short position of ALIBABA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aris Water and ALIBABA.

Diversification Opportunities for Aris Water and ALIBABA

-0.41

Correlation Coefficient

Aris Water  ALIBABA

Very good diversification

The 3 months correlation between Aris and ALIBABA is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Aris Water Solutions and ALIBABA GROUP HLDG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALIBABA GROUP HLDG and Aris Water 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 Aris Water Solutions are associated (or correlated) with ALIBABA. 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 HLDG has no effect on the direction of Aris Water i.e., Aris Water and ALIBABA go up and down completely randomly.

Pair Corralation between Aris Water and ALIBABA

Given the investment horizon of 90 days Aris Water Solutions is expected to generate 4.89 times more return on investment than ALIBABA. However, Aris Water is 4.89 times more volatile than ALIBABA GROUP HLDG. It trades about 0.16 of its potential returns per unit of risk. ALIBABA GROUP HLDG is currently generating about 0.01 per unit of risk. If you would invest  774.00  in Aris Water Solutions on September 12, 2024 and sell it today you would earn a total of  1,863  from holding Aris Water Solutions or generate 240.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	48.79%
Values	Daily Returns

Aris Water Solutions  vs.  ALIBABA GROUP HLDG

Aris Water Solutions

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aris Water Solutions are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak forward indicators, Aris Water unveiled solid returns over the last few months and may actually be approaching a breakup point.

ALIBABA GROUP HLDG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ALIBABA GROUP HLDG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for ALIBABA GROUP HLDG investors.

Pair Trading with Aris Water and ALIBABA

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

The idea behind Aris Water Solutions and ALIBABA GROUP HLDG 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.