Correlation Between Alibaba Group and Medical Care

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

Diversification Opportunities for Alibaba Group and Medical Care

0.17

Correlation Coefficient

Alibaba Group  Medical Care

Average diversification

The 3 months correlation between Alibaba and Medical is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and Medical Care Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medical Care Technologies 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 Medical Care. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medical Care Technologies has no effect on the direction of Alibaba Group i.e., Alibaba Group and Medical Care go up and down completely randomly.

Pair Corralation between Alibaba Group and Medical Care

Given the investment horizon of 90 days Alibaba Group Holding is expected to generate 0.07 times more return on investment than Medical Care. However, Alibaba Group Holding is 14.5 times less risky than Medical Care. It trades about 0.02 of its potential returns per unit of risk. Medical Care Technologies is currently generating about -0.04 per unit of risk. If you would invest  8,514  in Alibaba Group Holding on October 24, 2024 and sell it today you would earn a total of  24.00  from holding Alibaba Group Holding or generate 0.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Alibaba Group Holding  vs.  Medical Care Technologies

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 latest unsteady performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Medical Care Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Alibaba Group and Medical Care

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

The idea behind Alibaba Group Holding and Medical Care Technologies 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.