Correlation Between Alibaba Group and Qurate Retail

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

Diversification Opportunities for Alibaba Group and Qurate Retail

0.07

Correlation Coefficient

Alibaba Group  Qurate Retail

Significant diversification

The 3 months correlation between Alibaba and Qurate is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and Qurate Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qurate Retail 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 Qurate Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qurate Retail has no effect on the direction of Alibaba Group i.e., Alibaba Group and Qurate Retail go up and down completely randomly.

Pair Corralation between Alibaba Group and Qurate Retail

Assuming the 90 days horizon Alibaba Group is expected to generate 2.09 times less return on investment than Qurate Retail. In addition to that, Alibaba Group is 1.01 times more volatile than Qurate Retail. It trades about 0.02 of its total potential returns per unit of risk. Qurate Retail is currently generating about 0.04 per unit of volatility. If you would invest  2,276  in Qurate Retail on September 19, 2024 and sell it today you would earn a total of  1,248  from holding Qurate Retail or generate 54.83% return on investment over 90 days.

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

Alibaba Group Holding  vs.  Qurate Retail

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.

Qurate Retail

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Qurate Retail has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Preferred Stock's technical and fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Alibaba Group and Qurate Retail

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

The idea behind Alibaba Group Holding and Qurate Retail 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.