Correlation Between Alibaba Group and PC Jeweller

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

Diversification Opportunities for Alibaba Group and PC Jeweller

0.53

Correlation Coefficient

Alibaba Group  PC Jeweller

Very weak diversification

The 3 months correlation between Alibaba and PCJEWELLER is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and PC Jeweller Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PC Jeweller Limited 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 PC Jeweller. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PC Jeweller Limited has no effect on the direction of Alibaba Group i.e., Alibaba Group and PC Jeweller go up and down completely randomly.

Pair Corralation between Alibaba Group and PC Jeweller

Given the investment horizon of 90 days Alibaba Group Holding is expected to under-perform the PC Jeweller. But the stock apears to be less risky and, when comparing its historical volatility, Alibaba Group Holding is 2.3 times less risky than PC Jeweller. The stock trades about -0.01 of its potential returns per unit of risk. The PC Jeweller Limited is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  8,065  in PC Jeweller Limited on October 4, 2024 and sell it today you would lose (6,474) from holding PC Jeweller Limited or give up 80.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.59%
Values	Daily Returns

Alibaba Group Holding  vs.  PC Jeweller Limited

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.

PC Jeweller Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PC Jeweller Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Alibaba Group and PC Jeweller

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

The idea behind Alibaba Group Holding and PC Jeweller Limited 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.