Correlation Between Alibaba Group and Clover Health

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

Diversification Opportunities for Alibaba Group and Clover Health

0.25

Correlation Coefficient

Alibaba Group  Clover Health

Modest diversification

The 3 months correlation between Alibaba and Clover is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and Clover Health Investments, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clover Health Invest 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 Clover Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clover Health Invest has no effect on the direction of Alibaba Group i.e., Alibaba Group and Clover Health go up and down completely randomly.

Pair Corralation between Alibaba Group and Clover Health

Assuming the 90 days trading horizon Alibaba Group Holding is expected to under-perform the Clover Health. But the stock apears to be less risky and, when comparing its historical volatility, Alibaba Group Holding is 1.81 times less risky than Clover Health. The stock trades about -0.19 of its potential returns per unit of risk. The Clover Health Investments, is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,986  in Clover Health Investments, on October 8, 2024 and sell it today you would earn a total of  24.00  from holding Clover Health Investments, or generate 1.21% return on investment over 90 days.

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

Alibaba Group Holding  vs.  Clover Health Investments,

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 weak 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.

Clover Health Invest

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clover Health Investments, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Clover Health is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alibaba Group and Clover Health

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

The idea behind Alibaba Group Holding and Clover Health Investments, 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.