Correlation Between Apple and Alibaba Group
Can any of the company-specific risk be diversified away by investing in both Apple 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 Apple and Alibaba Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and Alibaba Group Holding, you can compare the effects of market volatilities on Apple 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 Apple with a short position of Alibaba Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Alibaba Group.
Diversification Opportunities for Apple and Alibaba Group
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Apple and Alibaba is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Apple 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 Apple 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 Apple 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 Apple i.e., Apple and Alibaba Group go up and down completely randomly.
Pair Corralation between Apple and Alibaba Group
Assuming the 90 days trading horizon Apple Inc is expected to generate 0.4 times more return on investment than Alibaba Group. However, Apple Inc is 2.53 times less risky than Alibaba Group. It trades about 0.39 of its potential returns per unit of risk. Alibaba Group Holding is currently generating about -0.11 per unit of risk. If you would invest 20,461 in Apple Inc on September 2, 2024 and sell it today you would earn a total of 1,974 from holding Apple Inc or generate 9.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Apple Inc vs. Alibaba Group Holding
Performance |
| Timeline |
| Apple Inc |
| Alibaba Group Holding |
Apple and Alibaba Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and Alibaba Group
The main advantage of trading using opposite Apple and Alibaba Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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.| Apple vs. Strategic Investments AS | Apple vs. Gladstone Investment | Apple vs. SEI INVESTMENTS | Apple vs. EAT WELL INVESTMENT |
| Alibaba Group vs. Strategic Investments AS | Alibaba Group vs. SEI INVESTMENTS | Alibaba Group vs. WisdomTree Investments | Alibaba Group vs. SHIP HEALTHCARE HLDGINC |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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