Correlation Between Alibaba Group and Dillards

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

Diversification Opportunities for Alibaba Group and Dillards

-0.79

Correlation Coefficient

Alibaba Group  Dillards

Pay attention - limited upside

The 3 months correlation between Alibaba and Dillards is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and Dillards in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dillards 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 Dillards. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dillards has no effect on the direction of Alibaba Group i.e., Alibaba Group and Dillards go up and down completely randomly.

Pair Corralation between Alibaba Group and Dillards

Given the investment horizon of 90 days Alibaba Group Holding is expected to generate 0.92 times more return on investment than Dillards. However, Alibaba Group Holding is 1.09 times less risky than Dillards. It trades about 0.05 of its potential returns per unit of risk. Dillards is currently generating about 0.03 per unit of risk. If you would invest  7,379  in Alibaba Group Holding on September 23, 2024 and sell it today you would earn a total of  849.00  from holding Alibaba Group Holding or generate 11.51% return on investment over 90 days.

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

Alibaba Group Holding  vs.  Dillards

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 somewhat strong fundamental drivers, Alibaba Group is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Dillards

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dillards are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady fundamental indicators, Dillards unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alibaba Group and Dillards

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

The idea behind Alibaba Group Holding and Dillards 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.