Correlation Between ATT and Alibaba Group

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

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

Diversification Opportunities for ATT and Alibaba Group

-0.86

Correlation Coefficient

ATT  Alibaba Group

Pay attention - limited upside

The 3 months correlation between ATT and Alibaba is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding ATT 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 ATT 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 ATT 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 ATT i.e., ATT and Alibaba Group go up and down completely randomly.

Pair Corralation between ATT and Alibaba Group

Given the investment horizon of 90 days ATT Inc is expected to under-perform the Alibaba Group. But the stock apears to be less risky and, when comparing its historical volatility, ATT Inc is 1.85 times less risky than Alibaba Group. The stock trades about -0.05 of its potential returns per unit of risk. The Alibaba Group Holding is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  170,000  in Alibaba Group Holding on October 6, 2024 and sell it today you would earn a total of  6,448  from holding Alibaba Group Holding or generate 3.79% return on investment over 90 days.

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

ATT Inc  vs.  Alibaba Group Holding

ATT Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ATT Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, ATT showed solid returns over the last few months and may actually be approaching a breakup point.

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. In spite of weak performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with ATT and Alibaba Group

The main advantage of trading using opposite ATT and Alibaba Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATT 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 ATT 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.