Correlation Between Alibaba Group and Alcoa Corp
Can any of the company-specific risk be diversified away by investing in both Alibaba Group and Alcoa Corp 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 Alcoa Corp 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 Alcoa Corp, you can compare the effects of market volatilities on Alibaba Group and Alcoa Corp 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 Alcoa Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alibaba Group and Alcoa Corp.
Diversification Opportunities for Alibaba Group and Alcoa Corp
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Alibaba and Alcoa is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and Alcoa Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alcoa Corp 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 Alcoa Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alcoa Corp has no effect on the direction of Alibaba Group i.e., Alibaba Group and Alcoa Corp go up and down completely randomly.
Pair Corralation between Alibaba Group and Alcoa Corp
Given the investment horizon of 90 days Alibaba Group is expected to generate 6.15 times less return on investment than Alcoa Corp. But when comparing it to its historical volatility, Alibaba Group Holding is 1.45 times less risky than Alcoa Corp. It trades about 0.02 of its potential returns per unit of risk. Alcoa Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 3,858 in Alcoa Corp on October 24, 2024 and sell it today you would earn a total of 95.00 from holding Alcoa Corp or generate 2.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alibaba Group Holding vs. Alcoa Corp
Performance |
| Timeline |
| Alibaba Group Holding |
| Alcoa Corp |
Alibaba Group and Alcoa Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alibaba Group and Alcoa Corp
The main advantage of trading using opposite Alibaba Group and Alcoa Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alibaba Group position performs unexpectedly, Alcoa Corp 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 Alcoa Corp will offset losses from the drop in Alcoa Corp's long position.| Alibaba Group vs. PDD Holdings | Alibaba Group vs. MercadoLibre | Alibaba Group vs. JD Inc Adr | Alibaba Group vs. Sea |
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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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