Correlation Between Joint Stock and Alibaba Group

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

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

Diversification Opportunities for Joint Stock and Alibaba Group

0.41

Correlation Coefficient

Joint Stock  Alibaba Group

Very weak diversification

The 3 months correlation between Joint and Alibaba is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Joint Stock 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 Joint Stock 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 Joint Stock 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 Joint Stock i.e., Joint Stock and Alibaba Group go up and down completely randomly.

Pair Corralation between Joint Stock and Alibaba Group

Given the investment horizon of 90 days Joint Stock is expected to under-perform the Alibaba Group. But the stock apears to be less risky and, when comparing its historical volatility, Joint Stock is 2.18 times less risky than Alibaba Group. The stock trades about 0.0 of its potential returns per unit of risk. The Alibaba Group Holding is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  1,057  in Alibaba Group Holding on December 29, 2024 and sell it today you would earn a total of  659.00  from holding Alibaba Group Holding or generate 62.35% return on investment over 90 days.

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

Joint Stock  vs.  Alibaba Group Holding

Joint Stock

Risk-Adjusted Performance

Very Weak

Over the last 90 days Joint Stock has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Joint Stock is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Alibaba Group Holding

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alibaba Group Holding are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Alibaba Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Joint Stock and Alibaba Group

The main advantage of trading using opposite Joint Stock and Alibaba Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Joint Stock 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 Joint Stock 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.