Correlation Between Medical Care and Alibaba Group

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

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

Diversification Opportunities for Medical Care and Alibaba Group

0.17

Correlation Coefficient

Medical Care  Alibaba Group

Average diversification

The 3 months correlation between Medical and Alibaba is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Medical Care Technologies 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 Medical Care 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 Medical Care Technologies 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 Medical Care i.e., Medical Care and Alibaba Group go up and down completely randomly.

Pair Corralation between Medical Care and Alibaba Group

Given the investment horizon of 90 days Medical Care Technologies is expected to under-perform the Alibaba Group. In addition to that, Medical Care is 14.5 times more volatile than Alibaba Group Holding. It trades about -0.04 of its total potential returns per unit of risk. Alibaba Group Holding is currently generating about 0.02 per unit of volatility. If you would invest  8,514  in Alibaba Group Holding on October 24, 2024 and sell it today you would earn a total of  24.00  from holding Alibaba Group Holding or generate 0.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Medical Care Technologies  vs.  Alibaba Group Holding

Medical Care Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Medical Care Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather unfluctuating fundamental indicators, Medical Care may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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. Despite latest unsteady performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Medical Care and Alibaba Group

The main advantage of trading using opposite Medical Care and Alibaba Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Medical Care 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 Medical Care Technologies 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.