Correlation Between Alibaba Group and LS 1x

Can any of the company-specific risk be diversified away by investing in both Alibaba Group and LS 1x 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 LS 1x 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 LS 1x Tesla, you can compare the effects of market volatilities on Alibaba Group and LS 1x 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 LS 1x. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alibaba Group and LS 1x.

Diversification Opportunities for Alibaba Group and LS 1x

-0.54

Correlation Coefficient

Alibaba Group  LS 1x

Excellent diversification

The 3 months correlation between Alibaba and 1TSL is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and LS 1x Tesla in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LS 1x Tesla 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 LS 1x. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LS 1x Tesla has no effect on the direction of Alibaba Group i.e., Alibaba Group and LS 1x go up and down completely randomly.

Pair Corralation between Alibaba Group and LS 1x

Given the investment horizon of 90 days Alibaba Group Holding is expected to under-perform the LS 1x. But the stock apears to be less risky and, when comparing its historical volatility, Alibaba Group Holding is 2.33 times less risky than LS 1x. The stock trades about -0.12 of its potential returns per unit of risk. The LS 1x Tesla is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  532.00  in LS 1x Tesla on October 22, 2024 and sell it today you would earn a total of  535.00  from holding LS 1x Tesla or generate 100.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Alibaba Group Holding  vs.  LS 1x Tesla

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.

LS 1x Tesla

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in LS 1x Tesla are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, LS 1x unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alibaba Group and LS 1x

The main advantage of trading using opposite Alibaba Group and LS 1x positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alibaba Group position performs unexpectedly, LS 1x 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 LS 1x will offset losses from the drop in LS 1x's long position.

The idea behind Alibaba Group Holding and LS 1x Tesla 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.