Correlation Between LPL Financial and Alibaba Group
Can any of the company-specific risk be diversified away by investing in both LPL Financial 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 LPL Financial and Alibaba Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LPL Financial Holdings and Alibaba Group Holding, you can compare the effects of market volatilities on LPL Financial 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 LPL Financial with a short position of Alibaba Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of LPL Financial and Alibaba Group.
Diversification Opportunities for LPL Financial and Alibaba Group
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between LPL and Alibaba is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding LPL Financial Holdings 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 LPL Financial 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 LPL Financial Holdings 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 LPL Financial i.e., LPL Financial and Alibaba Group go up and down completely randomly.
Pair Corralation between LPL Financial and Alibaba Group
Assuming the 90 days trading horizon LPL Financial is expected to generate 4.02 times less return on investment than Alibaba Group. But when comparing it to its historical volatility, LPL Financial Holdings is 2.03 times less risky than Alibaba Group. It trades about 0.08 of its potential returns per unit of risk. Alibaba Group Holding is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 1,871 in Alibaba Group Holding on November 5, 2024 and sell it today you would earn a total of 168.00 from holding Alibaba Group Holding or generate 8.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LPL Financial Holdings vs. Alibaba Group Holding
Performance |
| Timeline |
| LPL Financial Holdings |
| Alibaba Group Holding |
LPL Financial and Alibaba Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LPL Financial and Alibaba Group
The main advantage of trading using opposite LPL Financial and Alibaba Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LPL Financial 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.| LPL Financial vs. Cardinal Health, | LPL Financial vs. Guidewire Software, | LPL Financial vs. CVS Health | LPL Financial vs. CM Hospitalar SA |
| Alibaba Group vs. Take Two Interactive Software | Alibaba Group vs. GX AI TECH | Alibaba Group vs. Align Technology | Alibaba Group vs. BIONTECH SE DRN |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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