Correlation Between Alibaba Group and BlackRock

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

Diversification Opportunities for Alibaba Group and BlackRock

-0.52

Correlation Coefficient

Alibaba Group  BlackRock

Excellent diversification

The 3 months correlation between Alibaba and BlackRock is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and BlackRock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackRock 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 BlackRock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackRock has no effect on the direction of Alibaba Group i.e., Alibaba Group and BlackRock go up and down completely randomly.

Pair Corralation between Alibaba Group and BlackRock

Assuming the 90 days trading horizon Alibaba Group is expected to generate 1.26 times less return on investment than BlackRock. In addition to that, Alibaba Group is 1.35 times more volatile than BlackRock. It trades about 0.15 of its total potential returns per unit of risk. BlackRock is currently generating about 0.25 per unit of volatility. If you would invest  8,932  in BlackRock on September 27, 2024 and sell it today you would earn a total of  896.00  from holding BlackRock or generate 10.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Alibaba Group Holding  vs.  BlackRock

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 latest weak performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

BlackRock

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BlackRock are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BlackRock sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alibaba Group and BlackRock

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

The idea behind Alibaba Group Holding and BlackRock 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.