Correlation Between Alibaba Group and DTCOM Direct

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

Diversification Opportunities for Alibaba Group and DTCOM Direct

-0.2

Correlation Coefficient

Alibaba Group  DTCOM Direct

Good diversification

The 3 months correlation between Alibaba and DTCOM is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and DTCOM Direct in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DTCOM Direct 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 DTCOM Direct. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DTCOM Direct has no effect on the direction of Alibaba Group i.e., Alibaba Group and DTCOM Direct go up and down completely randomly.

Pair Corralation between Alibaba Group and DTCOM Direct

Assuming the 90 days trading horizon Alibaba Group Holding is expected to under-perform the DTCOM Direct. In addition to that, Alibaba Group is 1.2 times more volatile than DTCOM Direct. It trades about -0.09 of its total potential returns per unit of risk. DTCOM Direct is currently generating about 0.01 per unit of volatility. If you would invest  445.00  in DTCOM Direct on October 9, 2024 and sell it today you would lose (2.00) from holding DTCOM Direct or give up 0.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Alibaba Group Holding  vs.  DTCOM Direct

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.

DTCOM Direct

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DTCOM Direct has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, DTCOM Direct 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 DTCOM Direct

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

The idea behind Alibaba Group Holding and DTCOM Direct 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.