Correlation Between Alibaba Group and Deka Deutsche

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

Diversification Opportunities for Alibaba Group and Deka Deutsche

-0.14

Correlation Coefficient

Alibaba Group  Deka Deutsche

Good diversification

The 3 months correlation between Alibaba and Deka is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and Deka Deutsche Boerse in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deka Deutsche Boerse 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 Deka Deutsche. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deka Deutsche Boerse has no effect on the direction of Alibaba Group i.e., Alibaba Group and Deka Deutsche go up and down completely randomly.

Pair Corralation between Alibaba Group and Deka Deutsche

Given the investment horizon of 90 days Alibaba Group Holding is expected to generate 14.0 times more return on investment than Deka Deutsche. However, Alibaba Group is 14.0 times more volatile than Deka Deutsche Boerse. It trades about 0.24 of its potential returns per unit of risk. Deka Deutsche Boerse is currently generating about -0.05 per unit of risk. If you would invest  8,552  in Alibaba Group Holding on December 24, 2024 and sell it today you would earn a total of  4,962  from holding Alibaba Group Holding or generate 58.02% return on investment over 90 days.

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

Alibaba Group Holding  vs.  Deka Deutsche Boerse

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.

Deka Deutsche Boerse

Risk-Adjusted Performance

Very Weak

Over the last 90 days Deka Deutsche Boerse has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Deka Deutsche is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Alibaba Group and Deka Deutsche

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

The idea behind Alibaba Group Holding and Deka Deutsche Boerse 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.