Correlation Between Natural Health and Alibaba Group

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

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

Diversification Opportunities for Natural Health and Alibaba Group

0.04

Correlation Coefficient

Natural Health  Alibaba Group

Significant diversification

The 3 months correlation between Natural and Alibaba is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Natural Health Trend 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 Natural Health 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 Natural Health Trend 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 Natural Health i.e., Natural Health and Alibaba Group go up and down completely randomly.

Pair Corralation between Natural Health and Alibaba Group

Given the investment horizon of 90 days Natural Health Trend is expected to generate 0.71 times more return on investment than Alibaba Group. However, Natural Health Trend is 1.4 times less risky than Alibaba Group. It trades about 0.04 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  270.00  in Natural Health Trend on September 19, 2024 and sell it today you would earn a total of  132.00  from holding Natural Health Trend or generate 48.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Natural Health Trend  vs.  Alibaba Group Holding

Natural Health Trend

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Natural Health Trend has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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 Natural Health and Alibaba Group

The main advantage of trading using opposite Natural Health and Alibaba Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Natural Health 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 Natural Health Trend 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.