Correlation Between Alibaba Group and Lord Abbett

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

Diversification Opportunities for Alibaba Group and Lord Abbett

-0.84

Correlation Coefficient

Alibaba Group  Lord Abbett

Pay attention - limited upside

The 3 months correlation between Alibaba and Lord is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and Lord Abbett Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lord Abbett Investment 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 Lord Abbett. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lord Abbett Investment has no effect on the direction of Alibaba Group i.e., Alibaba Group and Lord Abbett go up and down completely randomly.

Pair Corralation between Alibaba Group and Lord Abbett

Given the investment horizon of 90 days Alibaba Group is expected to generate 1.13 times less return on investment than Lord Abbett. In addition to that, Alibaba Group is 18.58 times more volatile than Lord Abbett Investment. It trades about 0.01 of its total potential returns per unit of risk. Lord Abbett Investment is currently generating about 0.23 per unit of volatility. If you would invest  941.00  in Lord Abbett Investment on October 5, 2024 and sell it today you would earn a total of  85.00  from holding Lord Abbett Investment or generate 9.03% return on investment over 90 days.

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

Alibaba Group Holding  vs.  Lord Abbett Investment

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.

Lord Abbett Investment

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lord Abbett Investment are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Lord Abbett is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alibaba Group and Lord Abbett

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

The idea behind Alibaba Group Holding and Lord Abbett Investment 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.