Correlation Between Alibaba Group and WEG SA
Can any of the company-specific risk be diversified away by investing in both Alibaba Group and WEG SA 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 WEG SA 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 WEG SA, you can compare the effects of market volatilities on Alibaba Group and WEG SA 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 WEG SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alibaba Group and WEG SA.
Diversification Opportunities for Alibaba Group and WEG SA
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Alibaba and WEG is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and WEG SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WEG SA 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 WEG SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WEG SA has no effect on the direction of Alibaba Group i.e., Alibaba Group and WEG SA go up and down completely randomly.
Pair Corralation between Alibaba Group and WEG SA
Assuming the 90 days trading horizon Alibaba Group Holding is expected to under-perform the WEG SA. In addition to that, Alibaba Group is 1.56 times more volatile than WEG SA. It trades about -0.29 of its total potential returns per unit of risk. WEG SA is currently generating about -0.08 per unit of volatility. If you would invest 5,547 in WEG SA on August 26, 2024 and sell it today you would lose (146.00) from holding WEG SA or give up 2.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alibaba Group Holding vs. WEG SA
Performance |
| Timeline |
| Alibaba Group Holding |
| WEG SA |
Alibaba Group and WEG SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alibaba Group and WEG SA
The main advantage of trading using opposite Alibaba Group and WEG SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alibaba Group position performs unexpectedly, WEG SA 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 WEG SA will offset losses from the drop in WEG SA'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 |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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