Correlation Between Alibaba Group and Casa De

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

Diversification Opportunities for Alibaba Group and Casa De

-0.46

Correlation Coefficient

Alibaba Group  Casa De

Very good diversification

The 3 months correlation between Alibaba and Casa is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and Casa de Bolsa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Casa de Bolsa 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 Casa De. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Casa de Bolsa has no effect on the direction of Alibaba Group i.e., Alibaba Group and Casa De go up and down completely randomly.

Pair Corralation between Alibaba Group and Casa De

Assuming the 90 days trading horizon Alibaba Group Holding is expected to generate 7.56 times more return on investment than Casa De. However, Alibaba Group is 7.56 times more volatile than Casa de Bolsa. It trades about 0.06 of its potential returns per unit of risk. Casa de Bolsa is currently generating about 0.13 per unit of risk. If you would invest  162,100  in Alibaba Group Holding on September 15, 2024 and sell it today you would earn a total of  14,503  from holding Alibaba Group Holding or generate 8.95% return on investment over 90 days.

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

Alibaba Group Holding  vs.  Casa de Bolsa

Alibaba Group Holding

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alibaba Group Holding are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Alibaba Group may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Casa de Bolsa

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Casa de Bolsa are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong primary indicators, Casa De is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alibaba Group and Casa De

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

The idea behind Alibaba Group Holding and Casa de Bolsa 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.

Check out your portfolio center.

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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.