Correlation Between Alibaba Group and Value Grupo

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

Diversification Opportunities for Alibaba Group and Value Grupo

-0.28

Correlation Coefficient

Alibaba Group  Value Grupo

Very good diversification

The 3 months correlation between Alibaba and Value is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and Value Grupo Financiero in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Value Grupo Financiero 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 Value Grupo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Value Grupo Financiero has no effect on the direction of Alibaba Group i.e., Alibaba Group and Value Grupo go up and down completely randomly.

Pair Corralation between Alibaba Group and Value Grupo

Assuming the 90 days trading horizon Alibaba Group Holding is expected to generate 1.09 times more return on investment than Value Grupo. However, Alibaba Group is 1.09 times more volatile than Value Grupo Financiero. It trades about 0.16 of its potential returns per unit of risk. Value Grupo Financiero is currently generating about 0.03 per unit of risk. If you would invest  162,310  in Alibaba Group Holding on December 5, 2024 and sell it today you would earn a total of  110,269  from holding Alibaba Group Holding or generate 67.94% return on investment over 90 days.

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

Alibaba Group Holding  vs.  Value Grupo Financiero

Alibaba Group Holding

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alibaba Group Holding are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Alibaba Group displayed solid returns over the last few months and may actually be approaching a breakup point.

Value Grupo Financiero

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Value Grupo Financiero are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Value Grupo is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Alibaba Group and Value Grupo

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

The idea behind Alibaba Group Holding and Value Grupo Financiero 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.