Correlation Between Alibaba Group and Empresa Distribuidora
Can any of the company-specific risk be diversified away by investing in both Alibaba Group and Empresa Distribuidora 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 Empresa Distribuidora 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 Empresa Distribuidora y, you can compare the effects of market volatilities on Alibaba Group and Empresa Distribuidora 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 Empresa Distribuidora. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alibaba Group and Empresa Distribuidora.
Diversification Opportunities for Alibaba Group and Empresa Distribuidora
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Alibaba and Empresa is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and Empresa Distribuidora y in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empresa Distribuidora 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 Empresa Distribuidora. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Empresa Distribuidora has no effect on the direction of Alibaba Group i.e., Alibaba Group and Empresa Distribuidora go up and down completely randomly.
Pair Corralation between Alibaba Group and Empresa Distribuidora
Assuming the 90 days trading horizon Alibaba Group Holding is expected to generate 0.5 times more return on investment than Empresa Distribuidora. However, Alibaba Group Holding is 2.01 times less risky than Empresa Distribuidora. It trades about 0.41 of its potential returns per unit of risk. Empresa Distribuidora y is currently generating about -0.16 per unit of risk. If you would invest 1,107,500 in Alibaba Group Holding on November 2, 2024 and sell it today you would earn a total of 245,000 from holding Alibaba Group Holding or generate 22.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Alibaba Group Holding vs. Empresa Distribuidora y
Performance |
| Timeline |
| Alibaba Group Holding |
| Empresa Distribuidora |
Alibaba Group and Empresa Distribuidora Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alibaba Group and Empresa Distribuidora
The main advantage of trading using opposite Alibaba Group and Empresa Distribuidora positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alibaba Group position performs unexpectedly, Empresa Distribuidora 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 Empresa Distribuidora will offset losses from the drop in Empresa Distribuidora's long position.| Alibaba Group vs. Transportadora de Gas | Alibaba Group vs. Harmony Gold Mining | Alibaba Group vs. Compania de Transporte |
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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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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