Correlation Between Alibaba Group and Grupo Financiero

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

Diversification Opportunities for Alibaba Group and Grupo Financiero

0.02
  Correlation Coefficient

Significant diversification

The 3 months correlation between Alibaba and Grupo is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and Grupo Financiero Inbursa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Financiero Inbursa 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 Grupo Financiero. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Financiero Inbursa has no effect on the direction of Alibaba Group i.e., Alibaba Group and Grupo Financiero go up and down completely randomly.

Pair Corralation between Alibaba Group and Grupo Financiero

Assuming the 90 days trading horizon Alibaba Group Holding is expected to generate 1.4 times more return on investment than Grupo Financiero. However, Alibaba Group is 1.4 times more volatile than Grupo Financiero Inbursa. It trades about 0.05 of its potential returns per unit of risk. Grupo Financiero Inbursa is currently generating about 0.01 per unit of risk. If you would invest  163,400  in Alibaba Group Holding on September 18, 2024 and sell it today you would earn a total of  9,900  from holding Alibaba Group Holding or generate 6.06% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Alibaba Group Holding  vs.  Grupo Financiero Inbursa

 Performance 
       Timeline  
Alibaba Group Holding 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
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. 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.
Grupo Financiero Inbursa 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Weak
Over the last 90 days Grupo Financiero Inbursa has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, Grupo Financiero is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Alibaba Group and Grupo Financiero Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Alibaba Group and Grupo Financiero

The main advantage of trading using opposite Alibaba Group and Grupo Financiero positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alibaba Group position performs unexpectedly, Grupo Financiero 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 Grupo Financiero will offset losses from the drop in Grupo Financiero's long position.
The idea behind Alibaba Group Holding and Grupo Financiero Inbursa 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.

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