Correlation Between IPower and Alibaba Group

Can any of the company-specific risk be diversified away by investing in both IPower and Alibaba Group 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 IPower and Alibaba Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iPower Inc and Alibaba Group Holding, you can compare the effects of market volatilities on IPower and Alibaba Group 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 IPower with a short position of Alibaba Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of IPower and Alibaba Group.

Diversification Opportunities for IPower and Alibaba Group

0.65

Correlation Coefficient

IPower  Alibaba Group

Poor diversification

The 3 months correlation between IPower and Alibaba is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding iPower Inc and Alibaba Group Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alibaba Group Holding and IPower 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 iPower Inc are associated (or correlated) with Alibaba Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alibaba Group Holding has no effect on the direction of IPower i.e., IPower and Alibaba Group go up and down completely randomly.

Pair Corralation between IPower and Alibaba Group

Considering the 90-day investment horizon iPower Inc is expected to generate 2.85 times more return on investment than Alibaba Group. However, IPower is 2.85 times more volatile than Alibaba Group Holding. It trades about 0.06 of its potential returns per unit of risk. Alibaba Group Holding is currently generating about 0.02 per unit of risk. If you would invest  41.00  in iPower Inc on September 19, 2024 and sell it today you would earn a total of  53.00  from holding iPower Inc or generate 129.27% return on investment over 90 days.

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

iPower Inc  vs.  Alibaba Group Holding

iPower Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iPower Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the fund sophisticated investors.

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.

Pair Trading with IPower and Alibaba Group

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

The idea behind iPower Inc and Alibaba Group Holding 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.