Correlation Between Alibaba Group and MOWI ASA

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

Diversification Opportunities for Alibaba Group and MOWI ASA

-0.64

Correlation Coefficient

Alibaba Group  MOWI ASA

Excellent diversification

The 3 months correlation between Alibaba and MOWI is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and MOWI ASA SPADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MOWI ASA SPADR 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 MOWI ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MOWI ASA SPADR has no effect on the direction of Alibaba Group i.e., Alibaba Group and MOWI ASA go up and down completely randomly.

Pair Corralation between Alibaba Group and MOWI ASA

Given the investment horizon of 90 days Alibaba Group Holding is expected to generate 2.22 times more return on investment than MOWI ASA. However, Alibaba Group is 2.22 times more volatile than MOWI ASA SPADR. It trades about -0.01 of its potential returns per unit of risk. MOWI ASA SPADR is currently generating about -0.19 per unit of risk. If you would invest  8,568  in Alibaba Group Holding on October 4, 2024 and sell it today you would lose (73.00) from holding Alibaba Group Holding or give up 0.85% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	85.71%
Values	Daily Returns

Alibaba Group Holding  vs.  MOWI ASA SPADR

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.

MOWI ASA SPADR

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MOWI ASA SPADR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, MOWI ASA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Alibaba Group and MOWI ASA

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

The idea behind Alibaba Group Holding and MOWI ASA SPADR 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.