Correlation Between Alibaba Group and EBay
Can any of the company-specific risk be diversified away by investing in both Alibaba Group and EBay 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 EBay 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 eBay Inc, you can compare the effects of market volatilities on Alibaba Group and EBay 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 EBay. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alibaba Group and EBay.
Diversification Opportunities for Alibaba Group and EBay
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Alibaba and EBay is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and eBay Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on eBay Inc 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 EBay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of eBay Inc has no effect on the direction of Alibaba Group i.e., Alibaba Group and EBay go up and down completely randomly.
Pair Corralation between Alibaba Group and EBay
Assuming the 90 days trading horizon Alibaba Group is expected to generate 1.72 times less return on investment than EBay. In addition to that, Alibaba Group is 1.46 times more volatile than eBay Inc. It trades about 0.07 of its total potential returns per unit of risk. eBay Inc is currently generating about 0.17 per unit of volatility. If you would invest 13,219 in eBay Inc on August 26, 2024 and sell it today you would earn a total of 5,121 from holding eBay Inc or generate 38.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alibaba Group Holding vs. eBay Inc
Performance |
| Timeline |
| Alibaba Group Holding |
| eBay Inc |
Alibaba Group and EBay Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alibaba Group and EBay
The main advantage of trading using opposite Alibaba Group and EBay positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alibaba Group position performs unexpectedly, EBay 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 EBay will offset losses from the drop in EBay's long position.| Alibaba Group vs. Southwest Airlines Co | Alibaba Group vs. Hospital Mater Dei | Alibaba Group vs. Extra Space Storage | Alibaba Group vs. Apartment Investment and |
| EBay vs. HDFC Bank Limited | EBay vs. Paycom Software | EBay vs. SVB Financial Group | EBay vs. Sumitomo Mitsui Financial |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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