Correlation Between Alibaba Group and ASOS Plc

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Can any of the company-specific risk be diversified away by investing in both Alibaba Group and ASOS Plc 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 ASOS Plc 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 ASOS Plc, you can compare the effects of market volatilities on Alibaba Group and ASOS Plc 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 ASOS Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alibaba Group and ASOS Plc.

Diversification Opportunities for Alibaba Group and ASOS Plc

0.39
  Correlation Coefficient

Weak diversification

The 3 months correlation between Alibaba and ASOS is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and ASOS Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASOS Plc 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 ASOS Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASOS Plc has no effect on the direction of Alibaba Group i.e., Alibaba Group and ASOS Plc go up and down completely randomly.

Pair Corralation between Alibaba Group and ASOS Plc

If you would invest  541.00  in ASOS Plc on August 29, 2024 and sell it today you would earn a total of  0.00  from holding ASOS Plc or generate 0.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Alibaba Group Holding  vs.  ASOS Plc

 Performance 
       Timeline  
Alibaba Group Holding 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Alibaba Group Holding are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental drivers, Alibaba Group may actually be approaching a critical reversion point that can send shares even higher in December 2024.
ASOS Plc 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in ASOS Plc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak primary indicators, ASOS Plc reported solid returns over the last few months and may actually be approaching a breakup point.

Alibaba Group and ASOS Plc Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Alibaba Group and ASOS Plc

The main advantage of trading using opposite Alibaba Group and ASOS Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alibaba Group position performs unexpectedly, ASOS Plc 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 ASOS Plc will offset losses from the drop in ASOS Plc's long position.
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The idea behind Alibaba Group Holding and ASOS Plc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.

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