Correlation Between Alibaba Group and Cloud Live

Can any of the company-specific risk be diversified away by investing in both Alibaba Group and Cloud Live 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 Cloud Live 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 Cloud Live Technology, you can compare the effects of market volatilities on Alibaba Group and Cloud Live 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 Cloud Live. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alibaba Group and Cloud Live.

Diversification Opportunities for Alibaba Group and Cloud Live

-0.65

Correlation Coefficient

Alibaba Group  Cloud Live

Excellent diversification

The 3 months correlation between Alibaba and Cloud is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and Cloud Live Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cloud Live Technology 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 Cloud Live. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cloud Live Technology has no effect on the direction of Alibaba Group i.e., Alibaba Group and Cloud Live go up and down completely randomly.

Pair Corralation between Alibaba Group and Cloud Live

Given the investment horizon of 90 days Alibaba Group is expected to generate 1.01 times less return on investment than Cloud Live. But when comparing it to its historical volatility, Alibaba Group Holding is 1.76 times less risky than Cloud Live. It trades about 0.01 of its potential returns per unit of risk. Cloud Live Technology is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  375.00  in Cloud Live Technology on October 5, 2024 and sell it today you would lose (58.00) from holding Cloud Live Technology or give up 15.47% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	97.1%
Values	Daily Returns

Alibaba Group Holding  vs.  Cloud Live Technology

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 unsteady performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Cloud Live Technology

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cloud Live Technology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cloud Live may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Alibaba Group and Cloud Live

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

The idea behind Alibaba Group Holding and Cloud Live Technology 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.