Correlation Between Alibaba Group and CSN Minerao

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

Diversification Opportunities for Alibaba Group and CSN Minerao

0.35

Correlation Coefficient

Alibaba Group  CSN Minerao

Weak diversification

The 3 months correlation between Alibaba and CSN is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and CSN Minerao SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSN Minerao SA 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 CSN Minerao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSN Minerao SA has no effect on the direction of Alibaba Group i.e., Alibaba Group and CSN Minerao go up and down completely randomly.

Pair Corralation between Alibaba Group and CSN Minerao

Assuming the 90 days trading horizon Alibaba Group Holding is expected to generate 1.12 times more return on investment than CSN Minerao. However, Alibaba Group is 1.12 times more volatile than CSN Minerao SA. It trades about 0.22 of its potential returns per unit of risk. CSN Minerao SA is currently generating about 0.0 per unit of risk. If you would invest  1,870  in Alibaba Group Holding on December 1, 2024 and sell it today you would earn a total of  918.00  from holding Alibaba Group Holding or generate 49.09% 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.  CSN Minerao SA

Alibaba Group Holding

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alibaba Group Holding are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Alibaba Group sustained solid returns over the last few months and may actually be approaching a breakup point.

CSN Minerao SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days CSN Minerao SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, CSN Minerao is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Alibaba Group and CSN Minerao

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

The idea behind Alibaba Group Holding and CSN Minerao SA 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.