Correlation Between Instituto Rosenbusch and Alibaba Group

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

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

Diversification Opportunities for Instituto Rosenbusch and Alibaba Group

-0.05

Correlation Coefficient

Instituto Rosenbusch  Alibaba Group

Good diversification

The 3 months correlation between Instituto and Alibaba is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Instituto Rosenbusch SA 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 Instituto Rosenbusch 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 Instituto Rosenbusch SA 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 Instituto Rosenbusch i.e., Instituto Rosenbusch and Alibaba Group go up and down completely randomly.

Pair Corralation between Instituto Rosenbusch and Alibaba Group

Assuming the 90 days trading horizon Instituto Rosenbusch SA is expected to under-perform the Alibaba Group. But the stock apears to be less risky and, when comparing its historical volatility, Instituto Rosenbusch SA is 1.6 times less risky than Alibaba Group. The stock trades about -0.04 of its potential returns per unit of risk. The Alibaba Group Holding is currently generating about 0.42 of returns per unit of risk over similar time horizon. If you would invest  1,300,000  in Alibaba Group Holding on December 4, 2024 and sell it today you would earn a total of  497,500  from holding Alibaba Group Holding or generate 38.27% return on investment over 90 days.

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

Instituto Rosenbusch SA  vs.  Alibaba Group Holding

Instituto Rosenbusch

Risk-Adjusted Performance

Very Weak

Over the last 90 days Instituto Rosenbusch SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Instituto Rosenbusch is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Alibaba Group sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Instituto Rosenbusch and Alibaba Group

The main advantage of trading using opposite Instituto Rosenbusch and Alibaba Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Instituto Rosenbusch 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 Instituto Rosenbusch SA 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.