Correlation Between Alibaba Group and InnoDisk

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

Diversification Opportunities for Alibaba Group and InnoDisk

0.92

Correlation Coefficient

Alibaba Group  InnoDisk

Almost no diversification

The 3 months correlation between Alibaba and InnoDisk is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and InnoDisk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InnoDisk 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 InnoDisk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InnoDisk has no effect on the direction of Alibaba Group i.e., Alibaba Group and InnoDisk go up and down completely randomly.

Pair Corralation between Alibaba Group and InnoDisk

Given the investment horizon of 90 days Alibaba Group Holding is expected to under-perform the InnoDisk. In addition to that, Alibaba Group is 1.0 times more volatile than InnoDisk. It trades about -0.01 of its total potential returns per unit of risk. InnoDisk is currently generating about 0.03 per unit of volatility. If you would invest  16,344  in InnoDisk on October 5, 2024 and sell it today you would earn a total of  4,956  from holding InnoDisk or generate 30.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	96.57%
Values	Daily Returns

Alibaba Group Holding  vs.  InnoDisk

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.

InnoDisk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days InnoDisk has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Alibaba Group and InnoDisk

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

The idea behind Alibaba Group Holding and InnoDisk 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 Global Correlations module to find global opportunities by holding instruments from different markets.