Correlation Between Alibaba Group and Pacific Capital

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

Diversification Opportunities for Alibaba Group and Pacific Capital

0.37

Correlation Coefficient

Alibaba Group  Pacific Capital

Weak diversification

The 3 months correlation between Alibaba and Pacific is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and Pacific Capital Tax Free in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific Capital Tax 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 Pacific Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific Capital Tax has no effect on the direction of Alibaba Group i.e., Alibaba Group and Pacific Capital go up and down completely randomly.

Pair Corralation between Alibaba Group and Pacific Capital

Given the investment horizon of 90 days Alibaba Group Holding is expected to generate 14.57 times more return on investment than Pacific Capital. However, Alibaba Group is 14.57 times more volatile than Pacific Capital Tax Free. It trades about 0.05 of its potential returns per unit of risk. Pacific Capital Tax Free is currently generating about -0.27 per unit of risk. If you would invest  8,415  in Alibaba Group Holding on October 6, 2024 and sell it today you would earn a total of  139.00  from holding Alibaba Group Holding or generate 1.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Alibaba Group Holding  vs.  Pacific Capital Tax Free

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.

Pacific Capital Tax

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pacific Capital Tax Free has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Pacific Capital 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 Pacific Capital

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

The idea behind Alibaba Group Holding and Pacific Capital Tax Free 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.