Correlation Between Alibaba Group and Coupang LLC

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

Diversification Opportunities for Alibaba Group and Coupang LLC

0.52

Correlation Coefficient

Alibaba Group  Coupang LLC

Very weak diversification

The 3 months correlation between Alibaba and Coupang is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and Coupang LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coupang LLC 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 Coupang LLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coupang LLC has no effect on the direction of Alibaba Group i.e., Alibaba Group and Coupang LLC go up and down completely randomly.

Pair Corralation between Alibaba Group and Coupang LLC

Given the investment horizon of 90 days Alibaba Group Holding is expected to generate 1.65 times more return on investment than Coupang LLC. However, Alibaba Group is 1.65 times more volatile than Coupang LLC. It trades about 0.24 of its potential returns per unit of risk. Coupang LLC is currently generating about 0.02 per unit of risk. If you would invest  8,413  in Alibaba Group Holding on December 29, 2024 and sell it today you would earn a total of  4,830  from holding Alibaba Group Holding or generate 57.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Alibaba Group Holding  vs.  Coupang LLC

Alibaba Group Holding

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alibaba Group Holding are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental drivers, Alibaba Group sustained solid returns over the last few months and may actually be approaching a breakup point.

Coupang LLC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Coupang LLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Coupang LLC is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Alibaba Group and Coupang LLC

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

The idea behind Alibaba Group Holding and Coupang LLC 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.