Correlation Between Alibaba Group and Ring Energy
Can any of the company-specific risk be diversified away by investing in both Alibaba Group and Ring Energy 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 Alibaba Group and Ring Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alibaba Group Holding and Ring Energy, you can compare the effects of market volatilities on Alibaba Group and Ring Energy 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 Alibaba Group with a short position of Ring Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alibaba Group and Ring Energy.
Diversification Opportunities for Alibaba Group and Ring Energy
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Alibaba and Ring is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and Ring Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ring Energy and Alibaba Group 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 Alibaba Group Holding are associated (or correlated) with Ring Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ring Energy has no effect on the direction of Alibaba Group i.e., Alibaba Group and Ring Energy go up and down completely randomly.
Pair Corralation between Alibaba Group and Ring Energy
Assuming the 90 days horizon Alibaba Group Holding is expected to generate 0.78 times more return on investment than Ring Energy. However, Alibaba Group Holding is 1.28 times less risky than Ring Energy. It trades about 0.05 of its potential returns per unit of risk. Ring Energy is currently generating about 0.02 per unit of risk. If you would invest 789.00 in Alibaba Group Holding on September 8, 2024 and sell it today you would earn a total of 223.00 from holding Alibaba Group Holding or generate 28.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alibaba Group Holding vs. Ring Energy
Performance |
| Timeline |
| Alibaba Group Holding |
| Ring Energy |
Alibaba Group and Ring Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alibaba Group and Ring Energy
The main advantage of trading using opposite Alibaba Group and Ring Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alibaba Group position performs unexpectedly, Ring Energy 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 Ring Energy will offset losses from the drop in Ring Energy's long position.| Alibaba Group vs. American Public Education | Alibaba Group vs. Apollo Investment Corp | Alibaba Group vs. TAL Education Group | Alibaba Group vs. New Residential Investment |
| Ring Energy vs. Zurich Insurance Group | Ring Energy vs. Tradegate AG Wertpapierhandelsbank | Ring Energy vs. United Insurance Holdings | Ring Energy vs. Selective Insurance Group |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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