Correlation Between Alibaba Group and Kidpik Corp

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

Diversification Opportunities for Alibaba Group and Kidpik Corp

-0.27

Correlation Coefficient

Alibaba Group  Kidpik Corp

Very good diversification

The 3 months correlation between Alibaba and Kidpik is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and Kidpik Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kidpik Corp 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 Kidpik Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kidpik Corp has no effect on the direction of Alibaba Group i.e., Alibaba Group and Kidpik Corp go up and down completely randomly.

Pair Corralation between Alibaba Group and Kidpik Corp

Assuming the 90 days horizon Alibaba Group Holding is expected to generate 1.0 times more return on investment than Kidpik Corp. However, Alibaba Group Holding is 1.0 times less risky than Kidpik Corp. It trades about 0.11 of its potential returns per unit of risk. Kidpik Corp is currently generating about -0.01 per unit of risk. If you would invest  1,080  in Alibaba Group Holding on September 20, 2024 and sell it today you would earn a total of  120.00  from holding Alibaba Group Holding or generate 11.11% return on investment over 90 days.

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

Alibaba Group Holding  vs.  Kidpik Corp

Alibaba Group Holding

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alibaba Group Holding are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Alibaba Group reported solid returns over the last few months and may actually be approaching a breakup point.

Kidpik Corp

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kidpik Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward indicators, Kidpik Corp is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Alibaba Group and Kidpik Corp

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

The idea behind Alibaba Group Holding and Kidpik Corp 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.