Correlation Between Alibaba Health and Beijing Tong
Can any of the company-specific risk be diversified away by investing in both Alibaba Health and Beijing Tong 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 Alibaba Health and Beijing Tong into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alibaba Health Information and Beijing Tong Ren, you can compare the effects of market volatilities on Alibaba Health and Beijing Tong 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 Alibaba Health with a short position of Beijing Tong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alibaba Health and Beijing Tong.
Diversification Opportunities for Alibaba Health and Beijing Tong
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Alibaba and Beijing is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Health Information and Beijing Tong Ren in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Tong Ren and Alibaba Health 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 Alibaba Health Information are associated (or correlated) with Beijing Tong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Tong Ren has no effect on the direction of Alibaba Health i.e., Alibaba Health and Beijing Tong go up and down completely randomly.
Pair Corralation between Alibaba Health and Beijing Tong
Assuming the 90 days trading horizon Alibaba Health Information is expected to under-perform the Beijing Tong. In addition to that, Alibaba Health is 1.98 times more volatile than Beijing Tong Ren. It trades about -0.08 of its total potential returns per unit of risk. Beijing Tong Ren is currently generating about 0.15 per unit of volatility. If you would invest 96.00 in Beijing Tong Ren on September 5, 2024 and sell it today you would earn a total of 5.00 from holding Beijing Tong Ren or generate 5.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Alibaba Health Information vs. Beijing Tong Ren
Performance |
| Timeline |
| Alibaba Health Infor |
| Beijing Tong Ren |
Alibaba Health and Beijing Tong Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alibaba Health and Beijing Tong
The main advantage of trading using opposite Alibaba Health and Beijing Tong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alibaba Health position performs unexpectedly, Beijing Tong 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 Beijing Tong will offset losses from the drop in Beijing Tong's long position.| Alibaba Health vs. Alibaba Health Information | Alibaba Health vs. Beijing Tong Ren | Alibaba Health vs. Oriola Oyj | Alibaba Health vs. Rite Aid |
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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