Correlation Between Alibaba Group and Century Aluminum
Can any of the company-specific risk be diversified away by investing in both Alibaba Group and Century Aluminum 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 Century Aluminum 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 Century Aluminum, you can compare the effects of market volatilities on Alibaba Group and Century Aluminum 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 Century Aluminum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alibaba Group and Century Aluminum.
Diversification Opportunities for Alibaba Group and Century Aluminum
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Alibaba and Century is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and Century Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Aluminum 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 Century Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Aluminum has no effect on the direction of Alibaba Group i.e., Alibaba Group and Century Aluminum go up and down completely randomly.
Pair Corralation between Alibaba Group and Century Aluminum
Given the investment horizon of 90 days Alibaba Group Holding is expected to generate 0.52 times more return on investment than Century Aluminum. However, Alibaba Group Holding is 1.92 times less risky than Century Aluminum. It trades about -0.25 of its potential returns per unit of risk. Century Aluminum is currently generating about -0.29 per unit of risk. If you would invest 9,232 in Alibaba Group Holding on October 9, 2024 and sell it today you would lose (680.00) from holding Alibaba Group Holding or give up 7.37% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alibaba Group Holding vs. Century Aluminum
Performance |
| Timeline |
| Alibaba Group Holding |
| Century Aluminum |
Alibaba Group and Century Aluminum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alibaba Group and Century Aluminum
The main advantage of trading using opposite Alibaba Group and Century Aluminum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alibaba Group position performs unexpectedly, Century Aluminum 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 Century Aluminum will offset losses from the drop in Century Aluminum'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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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