Correlation Between Advance Auto and Alibaba Group
Can any of the company-specific risk be diversified away by investing in both Advance Auto 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 Advance Auto and Alibaba Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Advance Auto Parts and Alibaba Group Holding, you can compare the effects of market volatilities on Advance Auto 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 Advance Auto with a short position of Alibaba Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advance Auto and Alibaba Group.
Diversification Opportunities for Advance Auto and Alibaba Group
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Advance and Alibaba is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Advance Auto Parts 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 Advance Auto 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 Advance Auto Parts 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 Advance Auto i.e., Advance Auto and Alibaba Group go up and down completely randomly.
Pair Corralation between Advance Auto and Alibaba Group
Considering the 90-day investment horizon Advance Auto Parts is expected to generate 1.72 times more return on investment than Alibaba Group. However, Advance Auto is 1.72 times more volatile than Alibaba Group Holding. It trades about 0.21 of its potential returns per unit of risk. Alibaba Group Holding is currently generating about -0.32 per unit of risk. If you would invest 3,709 in Advance Auto Parts on August 28, 2024 and sell it today you would earn a total of 633.00 from holding Advance Auto Parts or generate 17.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Advance Auto Parts vs. Alibaba Group Holding
Performance |
| Timeline |
| Advance Auto Parts |
| Alibaba Group Holding |
Advance Auto and Alibaba Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Advance Auto and Alibaba Group
The main advantage of trading using opposite Advance Auto and Alibaba Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advance Auto 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.| Advance Auto vs. AutoZone | Advance Auto vs. Tractor Supply | Advance Auto vs. Genuine Parts Co | Advance Auto vs. Five Below |
| Alibaba Group vs. PDD Holdings | Alibaba Group vs. MercadoLibre | Alibaba Group vs. JD Inc Adr | Alibaba Group vs. Sea |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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