Correlation Between Banco Do and Alibaba Group
Can any of the company-specific risk be diversified away by investing in both Banco Do and Alibaba Group 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 Banco Do and Alibaba Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Banco do Estado and Alibaba Group Holding, you can compare the effects of market volatilities on Banco Do and Alibaba Group 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 Banco Do with a short position of Alibaba Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Do and Alibaba Group.
Diversification Opportunities for Banco Do and Alibaba Group
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Banco and Alibaba is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Banco do Estado and Alibaba Group Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alibaba Group Holding and Banco Do 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 Banco do Estado are associated (or correlated) with Alibaba Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alibaba Group Holding has no effect on the direction of Banco Do i.e., Banco Do and Alibaba Group go up and down completely randomly.
Pair Corralation between Banco Do and Alibaba Group
Assuming the 90 days trading horizon Banco do Estado is expected to generate 0.93 times more return on investment than Alibaba Group. However, Banco do Estado is 1.08 times less risky than Alibaba Group. It trades about 0.0 of its potential returns per unit of risk. Alibaba Group Holding is currently generating about -0.23 per unit of risk. If you would invest 2,385 in Banco do Estado on August 28, 2024 and sell it today you would lose (9.00) from holding Banco do Estado or give up 0.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Banco do Estado vs. Alibaba Group Holding
Performance |
| Timeline |
| Banco do Estado |
| Alibaba Group Holding |
Banco Do and Alibaba Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Banco Do and Alibaba Group
The main advantage of trading using opposite Banco Do and Alibaba Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco Do position performs unexpectedly, Alibaba Group 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 Alibaba Group will offset losses from the drop in Alibaba Group's long position.| Banco Do vs. Banco Alfa de | Banco Do vs. Banestes SA | Banco Do vs. Banco da Amaznia | Banco Do vs. Financeira Alfa SA |
| Alibaba Group vs. Prudential Financial | Alibaba Group vs. Agilent Technologies | Alibaba Group vs. Align Technology | Alibaba Group vs. Ameriprise 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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