Correlation Between Alibaba Group and Anhui Jinhe

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

Diversification Opportunities for Alibaba Group and Anhui Jinhe

0.0

Correlation Coefficient

Alibaba Group  Anhui Jinhe

Pay attention - limited upside

The 3 months correlation between Alibaba and Anhui is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and Anhui Jinhe Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anhui Jinhe Industrial 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 Anhui Jinhe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anhui Jinhe Industrial has no effect on the direction of Alibaba Group i.e., Alibaba Group and Anhui Jinhe go up and down completely randomly.

Pair Corralation between Alibaba Group and Anhui Jinhe

Given the investment horizon of 90 days Alibaba Group Holding is expected to under-perform the Anhui Jinhe. In addition to that, Alibaba Group is 1.08 times more volatile than Anhui Jinhe Industrial. It trades about -0.21 of its total potential returns per unit of risk. Anhui Jinhe Industrial is currently generating about -0.08 per unit of volatility. If you would invest  2,527  in Anhui Jinhe Industrial on October 6, 2024 and sell it today you would lose (287.00) from holding Anhui Jinhe Industrial or give up 11.36% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Alibaba Group Holding  vs.  Anhui Jinhe Industrial

Alibaba Group Holding

Risk-Adjusted Performance

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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.

Anhui Jinhe Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Alibaba Group and Anhui Jinhe

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

The idea behind Alibaba Group Holding and Anhui Jinhe Industrial 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 Transaction History module to view history of all your transactions and understand their impact on performance.