Correlation Between Alibaba Group and Solo Brands
Can any of the company-specific risk be diversified away by investing in both Alibaba Group and Solo Brands 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 Solo Brands 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 Solo Brands, you can compare the effects of market volatilities on Alibaba Group and Solo Brands 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 Solo Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alibaba Group and Solo Brands.
Diversification Opportunities for Alibaba Group and Solo Brands
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Alibaba and Solo is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and Solo Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solo Brands 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 Solo Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solo Brands has no effect on the direction of Alibaba Group i.e., Alibaba Group and Solo Brands go up and down completely randomly.
Pair Corralation between Alibaba Group and Solo Brands
Given the investment horizon of 90 days Alibaba Group Holding is expected to under-perform the Solo Brands. But the stock apears to be less risky and, when comparing its historical volatility, Alibaba Group Holding is 2.3 times less risky than Solo Brands. The stock trades about -0.28 of its potential returns per unit of risk. The Solo Brands is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 128.00 in Solo Brands on August 24, 2024 and sell it today you would lose (9.00) from holding Solo Brands or give up 7.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alibaba Group Holding vs. Solo Brands
Performance |
| Timeline |
| Alibaba Group Holding |
| Solo Brands |
Alibaba Group and Solo Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alibaba Group and Solo Brands
The main advantage of trading using opposite Alibaba Group and Solo Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alibaba Group position performs unexpectedly, Solo Brands 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 Solo Brands will offset losses from the drop in Solo Brands' long position.| Alibaba Group vs. PDD Holdings | Alibaba Group vs. MercadoLibre | Alibaba Group vs. JD Inc Adr | Alibaba Group vs. Sea |
| Solo Brands vs. Qurate Retail Series | Solo Brands vs. Hour Loop | Solo Brands vs. 1StdibsCom | Solo Brands vs. Baozun Inc |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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