Correlation Between Alibaba Group and Fidelity Advisor

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

Diversification Opportunities for Alibaba Group and Fidelity Advisor

0.09

Correlation Coefficient

Alibaba Group  Fidelity Advisor

Significant diversification

The 3 months correlation between Alibaba and Fidelity is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and Fidelity Advisor Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Advisor Series 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 Fidelity Advisor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Advisor Series has no effect on the direction of Alibaba Group i.e., Alibaba Group and Fidelity Advisor go up and down completely randomly.

Pair Corralation between Alibaba Group and Fidelity Advisor

Given the investment horizon of 90 days Alibaba Group Holding is expected to under-perform the Fidelity Advisor. In addition to that, Alibaba Group is 1.71 times more volatile than Fidelity Advisor Series. It trades about -0.01 of its total potential returns per unit of risk. Fidelity Advisor Series is currently generating about 0.05 per unit of volatility. If you would invest  1,175  in Fidelity Advisor Series on October 5, 2024 and sell it today you would earn a total of  420.00  from holding Fidelity Advisor Series or generate 35.74% return on investment over 90 days.

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

Alibaba Group Holding  vs.  Fidelity Advisor Series

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.

Fidelity Advisor Series

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Advisor Series has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's primary indicators remain fairly 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 fund investors.

Pair Trading with Alibaba Group and Fidelity Advisor

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

The idea behind Alibaba Group Holding and Fidelity Advisor Series 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.