Correlation Between Alibaba Group and GREENLIGHT CAP

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

Diversification Opportunities for Alibaba Group and GREENLIGHT CAP

-0.71

Correlation Coefficient

Alibaba Group  GREENLIGHT CAP

Pay attention - limited upside

The 3 months correlation between Alibaba and GREENLIGHT is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and GREENLIGHT CAP RE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GREENLIGHT CAP RE 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 GREENLIGHT CAP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GREENLIGHT CAP RE has no effect on the direction of Alibaba Group i.e., Alibaba Group and GREENLIGHT CAP go up and down completely randomly.

Pair Corralation between Alibaba Group and GREENLIGHT CAP

Given the investment horizon of 90 days Alibaba Group Holding is expected to under-perform the GREENLIGHT CAP. In addition to that, Alibaba Group is 1.39 times more volatile than GREENLIGHT CAP RE. It trades about -0.01 of its total potential returns per unit of risk. GREENLIGHT CAP RE is currently generating about 0.06 per unit of volatility. If you would invest  835.00  in GREENLIGHT CAP RE on October 5, 2024 and sell it today you would earn a total of  505.00  from holding GREENLIGHT CAP RE or generate 60.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.8%
Values	Daily Returns

Alibaba Group Holding  vs.  GREENLIGHT CAP RE

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.

GREENLIGHT CAP RE

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days GREENLIGHT CAP RE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather weak essential indicators, GREENLIGHT CAP may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Alibaba Group and GREENLIGHT CAP

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

The idea behind Alibaba Group Holding and GREENLIGHT CAP RE 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.

Check out your portfolio center.

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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.