Correlation Between Alibaba Group and Metrogas
Can any of the company-specific risk be diversified away by investing in both Alibaba Group and Metrogas 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 Metrogas 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 Metrogas SA, you can compare the effects of market volatilities on Alibaba Group and Metrogas 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 Metrogas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alibaba Group and Metrogas.
Diversification Opportunities for Alibaba Group and Metrogas
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Alibaba and Metrogas is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and Metrogas SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metrogas SA 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 Metrogas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metrogas SA has no effect on the direction of Alibaba Group i.e., Alibaba Group and Metrogas go up and down completely randomly.
Pair Corralation between Alibaba Group and Metrogas
Assuming the 90 days trading horizon Alibaba Group is expected to generate 4.12 times less return on investment than Metrogas. But when comparing it to its historical volatility, Alibaba Group Holding is 1.38 times less risky than Metrogas. It trades about 0.05 of its potential returns per unit of risk. Metrogas SA is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 50,500 in Metrogas SA on August 27, 2024 and sell it today you would earn a total of 166,000 from holding Metrogas SA or generate 328.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alibaba Group Holding vs. Metrogas SA
Performance |
| Timeline |
| Alibaba Group Holding |
| Metrogas SA |
Alibaba Group and Metrogas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alibaba Group and Metrogas
The main advantage of trading using opposite Alibaba Group and Metrogas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alibaba Group position performs unexpectedly, Metrogas 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 Metrogas will offset losses from the drop in Metrogas' long position.| Alibaba Group vs. Agrometal SAI | Alibaba Group vs. Telecom Argentina | Alibaba Group vs. Harmony Gold Mining | Alibaba Group vs. Transportadora de Gas |
| Metrogas vs. Compania de Transporte | Metrogas vs. Transportadora de Gas | Metrogas vs. United States Steel | Metrogas vs. Agrometal SAI |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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