Correlation Between Alibaba Group and JPM America

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

Diversification Opportunities for Alibaba Group and JPM America

-0.94

Correlation Coefficient

Alibaba Group  JPM America

Pay attention - limited upside

The 3 months correlation between Alibaba and JPM is -0.94. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and JPM America Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPM America Equity 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 JPM America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPM America Equity has no effect on the direction of Alibaba Group i.e., Alibaba Group and JPM America go up and down completely randomly.

Pair Corralation between Alibaba Group and JPM America

Given the investment horizon of 90 days Alibaba Group is expected to generate 24.26 times less return on investment than JPM America. In addition to that, Alibaba Group is 2.24 times more volatile than JPM America Equity. It trades about 0.0 of its total potential returns per unit of risk. JPM America Equity is currently generating about 0.09 per unit of volatility. If you would invest  36,013  in JPM America Equity on October 4, 2024 and sell it today you would earn a total of  7,597  from holding JPM America Equity or generate 21.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	58.82%
Values	Daily Returns

Alibaba Group Holding  vs.  JPM America Equity

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.

JPM America Equity

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JPM America Equity are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather weak technical and fundamental indicators, JPM America may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Alibaba Group and JPM America

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

The idea behind Alibaba Group Holding and JPM America Equity 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.