Correlation Between Alibaba Group and Rocket Internet

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

Diversification Opportunities for Alibaba Group and Rocket Internet

-0.36

Correlation Coefficient

Alibaba Group  Rocket Internet

Very good diversification

The 3 months correlation between Alibaba and Rocket is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and Rocket Internet SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rocket Internet SE 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 Rocket Internet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rocket Internet SE has no effect on the direction of Alibaba Group i.e., Alibaba Group and Rocket Internet go up and down completely randomly.

Pair Corralation between Alibaba Group and Rocket Internet

Given the investment horizon of 90 days Alibaba Group Holding is expected to generate 1.52 times more return on investment than Rocket Internet. However, Alibaba Group is 1.52 times more volatile than Rocket Internet SE. It trades about 0.02 of its potential returns per unit of risk. Rocket Internet SE is currently generating about -0.05 per unit of risk. If you would invest  8,156  in Alibaba Group Holding on October 22, 2024 and sell it today you would earn a total of  356.00  from holding Alibaba Group Holding or generate 4.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.74%
Values	Daily Returns

Alibaba Group Holding  vs.  Rocket Internet SE

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.

Rocket Internet SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rocket Internet SE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Rocket Internet is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Alibaba Group and Rocket Internet

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

The idea behind Alibaba Group Holding and Rocket Internet SE 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.