Correlation Between Alibaba Group and Meituan ADR
Can any of the company-specific risk be diversified away by investing in both Alibaba Group and Meituan ADR 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 Meituan ADR 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 Meituan ADR, you can compare the effects of market volatilities on Alibaba Group and Meituan ADR 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 Meituan ADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alibaba Group and Meituan ADR.
Diversification Opportunities for Alibaba Group and Meituan ADR
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Alibaba and Meituan is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and Meituan ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meituan ADR 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 Meituan ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meituan ADR has no effect on the direction of Alibaba Group i.e., Alibaba Group and Meituan ADR go up and down completely randomly.
Pair Corralation between Alibaba Group and Meituan ADR
Assuming the 90 days horizon Alibaba Group is expected to generate 1.05 times less return on investment than Meituan ADR. In addition to that, Alibaba Group is 1.05 times more volatile than Meituan ADR. It trades about 0.02 of its total potential returns per unit of risk. Meituan ADR is currently generating about 0.02 per unit of volatility. If you would invest 3,802 in Meituan ADR on November 2, 2024 and sell it today you would earn a total of 153.00 from holding Meituan ADR or generate 4.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Alibaba Group Holding vs. Meituan ADR
Performance |
| Timeline |
| Alibaba Group Holding |
| Meituan ADR |
Alibaba Group and Meituan ADR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alibaba Group and Meituan ADR
The main advantage of trading using opposite Alibaba Group and Meituan ADR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alibaba Group position performs unexpectedly, Meituan ADR 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 Meituan ADR will offset losses from the drop in Meituan ADR's long position.| Alibaba Group vs. Meituan ADR | Alibaba Group vs. Meituan | Alibaba Group vs. Qurate Retail Series | Alibaba Group vs. ThredUp |
| Meituan ADR vs. Jd Com Inc | Meituan ADR vs. MOGU Inc | Meituan ADR vs. Oriental Culture Holding | Meituan ADR vs. Alibaba Group Holding |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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