Correlation Between Alibaba Group and AKA Brands

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

Diversification Opportunities for Alibaba Group and AKA Brands

0.0

Correlation Coefficient

Alibaba Group  AKA Brands

Pay attention - limited upside

The 3 months correlation between Alibaba and AKA is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and AKA Brands Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AKA Brands Holding 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 AKA Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AKA Brands Holding has no effect on the direction of Alibaba Group i.e., Alibaba Group and AKA Brands go up and down completely randomly.

Pair Corralation between Alibaba Group and AKA Brands

Assuming the 90 days horizon Alibaba Group is expected to generate 4.89 times less return on investment than AKA Brands. But when comparing it to its historical volatility, Alibaba Group Holding is 2.06 times less risky than AKA Brands. It trades about 0.02 of its potential returns per unit of risk. AKA Brands Holding is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,452  in AKA Brands Holding on September 19, 2024 and sell it today you would earn a total of  708.00  from holding AKA Brands Holding or generate 48.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Alibaba Group Holding  vs.  AKA Brands Holding

Alibaba Group Holding

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alibaba Group Holding are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Alibaba Group may actually be approaching a critical reversion point that can send shares even higher in January 2025.

AKA Brands Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AKA Brands Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's forward-looking signals remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Alibaba Group and AKA Brands

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

The idea behind Alibaba Group Holding and AKA Brands Holding 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.