Correlation Between Alibaba Group and UPL

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

Diversification Opportunities for Alibaba Group and UPL

0.72

Correlation Coefficient

Alibaba Group  UPL

Poor diversification

The 3 months correlation between Alibaba and UPL is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and UPL Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UPL Limited 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 UPL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UPL Limited has no effect on the direction of Alibaba Group i.e., Alibaba Group and UPL go up and down completely randomly.

Pair Corralation between Alibaba Group and UPL

Given the investment horizon of 90 days Alibaba Group Holding is expected to under-perform the UPL. In addition to that, Alibaba Group is 1.34 times more volatile than UPL Limited. It trades about -0.22 of its total potential returns per unit of risk. UPL Limited is currently generating about -0.12 per unit of volatility. If you would invest  58,030  in UPL Limited on October 5, 2024 and sell it today you would lose (7,085) from holding UPL Limited or give up 12.21% of portfolio value over 90 days.

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

Alibaba Group Holding  vs.  UPL Limited

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.

UPL Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UPL Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Alibaba Group and UPL

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

The idea behind Alibaba Group Holding and UPL Limited 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.