Correlation Between Alibaba Group and Grand Canyon

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

Diversification Opportunities for Alibaba Group and Grand Canyon

-0.82

Correlation Coefficient

Alibaba Group  Grand Canyon

Pay attention - limited upside

The 3 months correlation between Alibaba and Grand is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and Grand Canyon Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grand Canyon Education 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 Grand Canyon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grand Canyon Education has no effect on the direction of Alibaba Group i.e., Alibaba Group and Grand Canyon go up and down completely randomly.

Pair Corralation between Alibaba Group and Grand Canyon

Given the investment horizon of 90 days Alibaba Group Holding is expected to under-perform the Grand Canyon. In addition to that, Alibaba Group is 1.44 times more volatile than Grand Canyon Education. It trades about -0.01 of its total potential returns per unit of risk. Grand Canyon Education is currently generating about 0.06 per unit of volatility. If you would invest  10,175  in Grand Canyon Education on October 5, 2024 and sell it today you would earn a total of  5,225  from holding Grand Canyon Education or generate 51.35% return on investment over 90 days.

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

Alibaba Group Holding  vs.  Grand Canyon Education

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.

Grand Canyon Education

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Grand Canyon Education has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly uncertain basic indicators, Grand Canyon reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alibaba Group and Grand Canyon

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

The idea behind Alibaba Group Holding and Grand Canyon Education 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.