Correlation Between Alibaba Group and Saville Resources

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

Diversification Opportunities for Alibaba Group and Saville Resources

-0.44

Correlation Coefficient

Alibaba Group  Saville Resources

Very good diversification

The 3 months correlation between Alibaba and Saville is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and Saville Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saville Resources 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 Saville Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saville Resources has no effect on the direction of Alibaba Group i.e., Alibaba Group and Saville Resources go up and down completely randomly.

Pair Corralation between Alibaba Group and Saville Resources

Given the investment horizon of 90 days Alibaba Group is expected to generate 31.34 times less return on investment than Saville Resources. But when comparing it to its historical volatility, Alibaba Group Holding is 7.29 times less risky than Saville Resources. It trades about 0.04 of its potential returns per unit of risk. Saville Resources is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  40.00  in Saville Resources on October 20, 2024 and sell it today you would earn a total of  6.00  from holding Saville Resources or generate 15.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	55.0%
Values	Daily Returns

Alibaba Group Holding  vs.  Saville Resources

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.

Saville Resources

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Saville Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly abnormal basic indicators, Saville Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alibaba Group and Saville Resources

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

The idea behind Alibaba Group Holding and Saville Resources 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.