Correlation Between Global E and Alibaba Group
Can any of the company-specific risk be diversified away by investing in both Global E 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 Global E and Alibaba Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global E Online and Alibaba Group Holding, you can compare the effects of market volatilities on Global E 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 Global E with a short position of Alibaba Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global E and Alibaba Group.
Diversification Opportunities for Global E and Alibaba Group
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Global and Alibaba is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Global E Online 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 Global E 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 Global E Online 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 Global E i.e., Global E and Alibaba Group go up and down completely randomly.
Pair Corralation between Global E and Alibaba Group
Given the investment horizon of 90 days Global E Online is expected to generate 1.58 times more return on investment than Alibaba Group. However, Global E is 1.58 times more volatile than Alibaba Group Holding. It trades about 0.4 of its potential returns per unit of risk. Alibaba Group Holding is currently generating about -0.42 per unit of risk. If you would invest 3,849 in Global E Online on August 27, 2024 and sell it today you would earn a total of 1,140 from holding Global E Online or generate 29.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global E Online vs. Alibaba Group Holding
Performance |
| Timeline |
| Global E Online |
| Alibaba Group Holding |
Global E and Alibaba Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global E and Alibaba Group
The main advantage of trading using opposite Global E and Alibaba Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global E 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.The idea behind Global E Online and Alibaba Group Holding pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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