Correlation Between Alibaba Group and Short-term Fund

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

Diversification Opportunities for Alibaba Group and Short-term Fund

-0.75

Correlation Coefficient

Alibaba Group  Short-term Fund

Pay attention - limited upside

The 3 months correlation between Alibaba and Short-term is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and Short Term Fund R in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Term Fund 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 Short-term Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Term Fund has no effect on the direction of Alibaba Group i.e., Alibaba Group and Short-term Fund go up and down completely randomly.

Pair Corralation between Alibaba Group and Short-term Fund

Given the investment horizon of 90 days Alibaba Group Holding is expected to under-perform the Short-term Fund. In addition to that, Alibaba Group is 30.99 times more volatile than Short Term Fund R. It trades about -0.22 of its total potential returns per unit of risk. Short Term Fund R is currently generating about 0.16 per unit of volatility. If you would invest  961.00  in Short Term Fund R on October 5, 2024 and sell it today you would earn a total of  7.00  from holding Short Term Fund R or generate 0.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Alibaba Group Holding  vs.  Short Term Fund R

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.

Short Term Fund

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Short Term Fund R are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Short-term Fund 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 Short-term Fund

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

The idea behind Alibaba Group Holding and Short Term Fund R 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.