Correlation Between Alibaba Group and Tokio Marine

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

Diversification Opportunities for Alibaba Group and Tokio Marine

-0.56

Correlation Coefficient

Alibaba Group  Tokio Marine

Excellent diversification

The 3 months correlation between Alibaba and Tokio is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and Tokio Marine Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokio Marine Holdings 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 Tokio Marine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tokio Marine Holdings has no effect on the direction of Alibaba Group i.e., Alibaba Group and Tokio Marine go up and down completely randomly.

Pair Corralation between Alibaba Group and Tokio Marine

Given the investment horizon of 90 days Alibaba Group Holding is expected to generate 1.3 times more return on investment than Tokio Marine. However, Alibaba Group is 1.3 times more volatile than Tokio Marine Holdings. It trades about 0.02 of its potential returns per unit of risk. Tokio Marine Holdings is currently generating about -0.14 per unit of risk. If you would invest  8,493  in Alibaba Group Holding on October 5, 2024 and sell it today you would earn a total of  28.00  from holding Alibaba Group Holding or generate 0.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	80.95%
Values	Daily Returns

Alibaba Group Holding  vs.  Tokio Marine Holdings

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.

Tokio Marine Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tokio Marine Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Tokio Marine is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Alibaba Group and Tokio Marine

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

The idea behind Alibaba Group Holding and Tokio Marine Holdings 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.