Correlation Between Coupang LLC and Alibaba Group
Can any of the company-specific risk be diversified away by investing in both Coupang LLC 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 Coupang LLC and Alibaba Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Coupang LLC and Alibaba Group Holding, you can compare the effects of market volatilities on Coupang LLC 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 Coupang LLC with a short position of Alibaba Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coupang LLC and Alibaba Group.
Diversification Opportunities for Coupang LLC and Alibaba Group
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Coupang and Alibaba is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Coupang LLC 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 Coupang LLC 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 Coupang LLC 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 Coupang LLC i.e., Coupang LLC and Alibaba Group go up and down completely randomly.
Pair Corralation between Coupang LLC and Alibaba Group
Given the investment horizon of 90 days Coupang LLC is expected to generate 1.05 times less return on investment than Alibaba Group. But when comparing it to its historical volatility, Coupang LLC is 1.05 times less risky than Alibaba Group. It trades about 0.05 of its potential returns per unit of risk. Alibaba Group Holding is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 7,724 in Alibaba Group Holding on September 1, 2024 and sell it today you would earn a total of 1,013 from holding Alibaba Group Holding or generate 13.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Coupang LLC vs. Alibaba Group Holding
Performance |
| Timeline |
| Coupang LLC |
| Alibaba Group Holding |
Coupang LLC and Alibaba Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coupang LLC and Alibaba Group
The main advantage of trading using opposite Coupang LLC and Alibaba Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coupang LLC 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.| Coupang LLC vs. PDD Holdings | Coupang LLC vs. JD Inc Adr | Coupang LLC vs. Alibaba Group Holding | Coupang LLC vs. Sea |
| Alibaba Group vs. PDD Holdings | Alibaba Group vs. MercadoLibre | Alibaba Group vs. JD Inc Adr | Alibaba Group vs. Sea |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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