Correlation Between Alibaba Group and Liquidity Services
Can any of the company-specific risk be diversified away by investing in both Alibaba Group and Liquidity Services 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 Liquidity Services 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 Liquidity Services, you can compare the effects of market volatilities on Alibaba Group and Liquidity Services 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 Liquidity Services. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alibaba Group and Liquidity Services.
Diversification Opportunities for Alibaba Group and Liquidity Services
-0.77 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Alibaba and Liquidity is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and Liquidity Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liquidity Services 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 Liquidity Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liquidity Services has no effect on the direction of Alibaba Group i.e., Alibaba Group and Liquidity Services go up and down completely randomly.
Pair Corralation between Alibaba Group and Liquidity Services
Given the investment horizon of 90 days Alibaba Group is expected to generate 8.21 times less return on investment than Liquidity Services. But when comparing it to its historical volatility, Alibaba Group Holding is 1.26 times less risky than Liquidity Services. It trades about 0.04 of its potential returns per unit of risk. Liquidity Services is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 3,141 in Liquidity Services on October 20, 2024 and sell it today you would earn a total of 315.00 from holding Liquidity Services or generate 10.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alibaba Group Holding vs. Liquidity Services
Performance |
| Timeline |
| Alibaba Group Holding |
| Liquidity Services |
Alibaba Group and Liquidity Services Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alibaba Group and Liquidity Services
The main advantage of trading using opposite Alibaba Group and Liquidity Services positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alibaba Group position performs unexpectedly, Liquidity Services 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 Liquidity Services will offset losses from the drop in Liquidity Services' 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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