Correlation Between Air Transport and Alibaba Group

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

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

Diversification Opportunities for Air Transport and Alibaba Group

-0.88

Correlation Coefficient

Air Transport  Alibaba Group

Pay attention - limited upside

The 3 months correlation between Air and Alibaba is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Air Transport Services 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 Air Transport 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 Air Transport Services 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 Air Transport i.e., Air Transport and Alibaba Group go up and down completely randomly.

Pair Corralation between Air Transport and Alibaba Group

Assuming the 90 days horizon Air Transport Services is expected to generate 1.13 times more return on investment than Alibaba Group. However, Air Transport is 1.13 times more volatile than Alibaba Group Holding. It trades about 0.06 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  1,490  in Air Transport Services on October 9, 2024 and sell it today you would earn a total of  630.00  from holding Air Transport Services or generate 42.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	99.6%
Values	Daily Returns

Air Transport Services  vs.  Alibaba Group Holding

Air Transport Services

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Air Transport Services are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Air Transport reported solid returns over the last few months and may actually be approaching a breakup point.

Alibaba Group Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alibaba Group Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Air Transport and Alibaba Group

The main advantage of trading using opposite Air Transport and Alibaba Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Transport 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.

The idea behind Air Transport Services and Alibaba Group Holding 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.