Correlation Between Alibaba Group and Chevron Corp
Can any of the company-specific risk be diversified away by investing in both Alibaba Group and Chevron 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 Chevron 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 Chevron Corp, you can compare the effects of market volatilities on Alibaba Group and Chevron 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 Chevron Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alibaba Group and Chevron Corp.
Diversification Opportunities for Alibaba Group and Chevron Corp
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Alibaba and Chevron is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and Chevron Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron 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 Chevron Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chevron Corp has no effect on the direction of Alibaba Group i.e., Alibaba Group and Chevron Corp go up and down completely randomly.
Pair Corralation between Alibaba Group and Chevron Corp
Given the investment horizon of 90 days Alibaba Group is expected to generate 26.91 times less return on investment than Chevron Corp. In addition to that, Alibaba Group is 1.98 times more volatile than Chevron Corp. It trades about 0.02 of its total potential returns per unit of risk. Chevron Corp is currently generating about 0.95 per unit of volatility. If you would invest 14,297 in Chevron Corp on October 24, 2024 and sell it today you would earn a total of 1,850 from holding Chevron Corp or generate 12.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alibaba Group Holding vs. Chevron Corp
Performance |
| Timeline |
| Alibaba Group Holding |
| Chevron Corp |
Alibaba Group and Chevron Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alibaba Group and Chevron Corp
The main advantage of trading using opposite Alibaba Group and Chevron Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alibaba Group position performs unexpectedly, Chevron 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 Chevron Corp will offset losses from the drop in Chevron Corp's long position.| Alibaba Group vs. PDD Holdings | Alibaba Group vs. MercadoLibre | Alibaba Group vs. JD Inc Adr | Alibaba Group vs. Sea |
| Chevron Corp vs. Shell PLC ADR | Chevron Corp vs. BP PLC ADR | Chevron Corp vs. Suncor Energy | Chevron Corp vs. Petroleo Brasileiro Petrobras |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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