Correlation Between Alibaba Group and Hafnia

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

Diversification Opportunities for Alibaba Group and Hafnia

0.8

Correlation Coefficient

Alibaba Group  Hafnia

Very poor diversification

The 3 months correlation between Alibaba and Hafnia is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and Hafnia Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hafnia Limited 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 Hafnia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hafnia Limited has no effect on the direction of Alibaba Group i.e., Alibaba Group and Hafnia go up and down completely randomly.

Pair Corralation between Alibaba Group and Hafnia

Given the investment horizon of 90 days Alibaba Group Holding is expected to generate 0.83 times more return on investment than Hafnia. However, Alibaba Group Holding is 1.21 times less risky than Hafnia. It trades about 0.04 of its potential returns per unit of risk. Hafnia Limited is currently generating about 0.01 per unit of risk. If you would invest  7,141  in Alibaba Group Holding on October 5, 2024 and sell it today you would earn a total of  1,354  from holding Alibaba Group Holding or generate 18.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.56%
Values	Daily Returns

Alibaba Group Holding  vs.  Hafnia Limited

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.

Hafnia Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hafnia Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak 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 Alibaba Group and Hafnia

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

The idea behind Alibaba Group Holding and Hafnia Limited 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.