Correlation Between Alibaba Group and Inverse Sp

Can any of the company-specific risk be diversified away by investing in both Alibaba Group and Inverse Sp 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 Inverse Sp 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 Inverse Sp 500, you can compare the effects of market volatilities on Alibaba Group and Inverse Sp 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 Inverse Sp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alibaba Group and Inverse Sp.

Diversification Opportunities for Alibaba Group and Inverse Sp

0.76

Correlation Coefficient

Alibaba Group  Inverse Sp

Poor diversification

The 3 months correlation between Alibaba and Inverse is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and Inverse Sp 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inverse Sp 500 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 Inverse Sp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inverse Sp 500 has no effect on the direction of Alibaba Group i.e., Alibaba Group and Inverse Sp go up and down completely randomly.

Pair Corralation between Alibaba Group and Inverse Sp

Given the investment horizon of 90 days Alibaba Group Holding is expected to under-perform the Inverse Sp. In addition to that, Alibaba Group is 1.34 times more volatile than Inverse Sp 500. It trades about -0.2 of its total potential returns per unit of risk. Inverse Sp 500 is currently generating about -0.09 per unit of volatility. If you would invest  2,392  in Inverse Sp 500 on October 4, 2024 and sell it today you would lose (234.00) from holding Inverse Sp 500 or give up 9.78% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Alibaba Group Holding  vs.  Inverse Sp 500

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.

Inverse Sp 500

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Inverse Sp 500 has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Alibaba Group and Inverse Sp

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

The idea behind Alibaba Group Holding and Inverse Sp 500 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.