Correlation Between WisdomTree Investments and Alibaba Group
Can any of the company-specific risk be diversified away by investing in both WisdomTree Investments 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 WisdomTree Investments and Alibaba Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree Investments and Alibaba Group Holding, you can compare the effects of market volatilities on WisdomTree Investments 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 WisdomTree Investments with a short position of Alibaba Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Investments and Alibaba Group.
Diversification Opportunities for WisdomTree Investments and Alibaba Group
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between WisdomTree and Alibaba is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Investments 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 WisdomTree Investments 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 WisdomTree Investments 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 WisdomTree Investments i.e., WisdomTree Investments and Alibaba Group go up and down completely randomly.
Pair Corralation between WisdomTree Investments and Alibaba Group
Assuming the 90 days horizon WisdomTree Investments is expected to generate 1.05 times more return on investment than Alibaba Group. However, WisdomTree Investments is 1.05 times more volatile than Alibaba Group Holding. It trades about 0.08 of its potential returns per unit of risk. Alibaba Group Holding is currently generating about 0.06 per unit of risk. If you would invest 898.00 in WisdomTree Investments on September 3, 2024 and sell it today you would earn a total of 228.00 from holding WisdomTree Investments or generate 25.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree Investments vs. Alibaba Group Holding
Performance |
| Timeline |
| WisdomTree Investments |
| Alibaba Group Holding |
WisdomTree Investments and Alibaba Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Investments and Alibaba Group
The main advantage of trading using opposite WisdomTree Investments and Alibaba Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Investments 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.| WisdomTree Investments vs. United Natural Foods | WisdomTree Investments vs. Solstad Offshore ASA | WisdomTree Investments vs. PKSHA TECHNOLOGY INC | WisdomTree Investments vs. DXC Technology Co |
| Alibaba Group vs. Apple Inc | Alibaba Group vs. Apple Inc | Alibaba Group vs. Apple Inc | Alibaba Group vs. Apple Inc |
Check out your portfolio center.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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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