Correlation Between McGrath RentCorp and ALIBABA

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Can any of the company-specific risk be diversified away by investing in both McGrath RentCorp and ALIBABA 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 McGrath RentCorp and ALIBABA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McGrath RentCorp and ALIBABA GROUP HLDG, you can compare the effects of market volatilities on McGrath RentCorp and ALIBABA 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 McGrath RentCorp with a short position of ALIBABA. Check out your portfolio center. Please also check ongoing floating volatility patterns of McGrath RentCorp and ALIBABA.

Diversification Opportunities for McGrath RentCorp and ALIBABA

-0.33
  Correlation Coefficient

Very good diversification

The 3 months correlation between McGrath and ALIBABA is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding McGrath RentCorp and ALIBABA GROUP HLDG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALIBABA GROUP HLDG and McGrath RentCorp 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 McGrath RentCorp are associated (or correlated) with ALIBABA. 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 HLDG has no effect on the direction of McGrath RentCorp i.e., McGrath RentCorp and ALIBABA go up and down completely randomly.

Pair Corralation between McGrath RentCorp and ALIBABA

Given the investment horizon of 90 days McGrath RentCorp is expected to generate 0.73 times more return on investment than ALIBABA. However, McGrath RentCorp is 1.37 times less risky than ALIBABA. It trades about 0.47 of its potential returns per unit of risk. ALIBABA GROUP HLDG is currently generating about -0.17 per unit of risk. If you would invest  11,137  in McGrath RentCorp on November 1, 2024 and sell it today you would earn a total of  1,294  from holding McGrath RentCorp or generate 11.62% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy90.0%
ValuesDaily Returns

McGrath RentCorp  vs.  ALIBABA GROUP HLDG

 Performance 
       Timeline  
McGrath RentCorp 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in McGrath RentCorp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, McGrath RentCorp may actually be approaching a critical reversion point that can send shares even higher in March 2025.
ALIBABA GROUP HLDG 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days ALIBABA GROUP HLDG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ALIBABA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

McGrath RentCorp and ALIBABA Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with McGrath RentCorp and ALIBABA

The main advantage of trading using opposite McGrath RentCorp and ALIBABA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McGrath RentCorp position performs unexpectedly, ALIBABA 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 will offset losses from the drop in ALIBABA's long position.
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The idea behind McGrath RentCorp and ALIBABA GROUP HLDG 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.
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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..

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