Correlation Between Meituan ADR and Alibaba Group
Can any of the company-specific risk be diversified away by investing in both Meituan ADR 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 Meituan ADR and Alibaba Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Meituan ADR and Alibaba Group Holding, you can compare the effects of market volatilities on Meituan ADR 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 Meituan ADR with a short position of Alibaba Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meituan ADR and Alibaba Group.
Diversification Opportunities for Meituan ADR and Alibaba Group
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Meituan and Alibaba is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Meituan ADR 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 Meituan ADR 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 Meituan ADR 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 Meituan ADR i.e., Meituan ADR and Alibaba Group go up and down completely randomly.
Pair Corralation between Meituan ADR and Alibaba Group
Assuming the 90 days horizon Meituan ADR is expected to generate 1.67 times more return on investment than Alibaba Group. However, Meituan ADR is 1.67 times more volatile than Alibaba Group Holding. It trades about 0.16 of its potential returns per unit of risk. Alibaba Group Holding is currently generating about 0.05 per unit of risk. If you would invest 2,806 in Meituan ADR on August 28, 2024 and sell it today you would earn a total of 1,389 from holding Meituan ADR or generate 49.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Meituan ADR vs. Alibaba Group Holding
Performance |
| Timeline |
| Meituan ADR |
| Alibaba Group Holding |
Meituan ADR and Alibaba Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Meituan ADR and Alibaba Group
The main advantage of trading using opposite Meituan ADR and Alibaba Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meituan ADR 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.| Meituan ADR vs. 1StdibsCom | Meituan ADR vs. Natural Health Trend | Meituan ADR vs. Hour Loop | Meituan ADR vs. Liquidity Services |
| 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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