Correlation Between Alibaba Group and Corporativo Fragua

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

Diversification Opportunities for Alibaba Group and Corporativo Fragua

0.89

Correlation Coefficient

Alibaba Group  Corporativo Fragua

Very poor diversification

The 3 months correlation between Alibaba and Corporativo is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and Corporativo Fragua SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Corporativo Fragua SAB 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 Corporativo Fragua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Corporativo Fragua SAB has no effect on the direction of Alibaba Group i.e., Alibaba Group and Corporativo Fragua go up and down completely randomly.

Pair Corralation between Alibaba Group and Corporativo Fragua

Assuming the 90 days trading horizon Alibaba Group Holding is expected to generate 0.68 times more return on investment than Corporativo Fragua. However, Alibaba Group Holding is 1.48 times less risky than Corporativo Fragua. It trades about -0.09 of its potential returns per unit of risk. Corporativo Fragua SAB is currently generating about -0.24 per unit of risk. If you would invest  200,273  in Alibaba Group Holding on October 22, 2024 and sell it today you would lose (23,273) from holding Alibaba Group Holding or give up 11.62% of portfolio value over 90 days.

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

Alibaba Group Holding  vs.  Corporativo Fragua SAB

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. In spite of latest weak performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Corporativo Fragua SAB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Corporativo Fragua SAB 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 technical and fundamental indicators 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.

Pair Trading with Alibaba Group and Corporativo Fragua

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

The idea behind Alibaba Group Holding and Corporativo Fragua SAB 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.