Correlation Between Walmart and Alibaba Group
Can any of the company-specific risk be diversified away by investing in both Walmart 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 Walmart and Alibaba Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and Alibaba Group Holding, you can compare the effects of market volatilities on Walmart 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 Walmart with a short position of Alibaba Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Alibaba Group.
Diversification Opportunities for Walmart and Alibaba Group
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Walmart and Alibaba is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Walmart 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 Walmart 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 Walmart 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 Walmart i.e., Walmart and Alibaba Group go up and down completely randomly.
Pair Corralation between Walmart and Alibaba Group
Assuming the 90 days trading horizon Walmart is expected to generate 0.53 times more return on investment than Alibaba Group. However, Walmart is 1.88 times less risky than Alibaba Group. It trades about 0.38 of its potential returns per unit of risk. Alibaba Group Holding is currently generating about 0.07 per unit of risk. If you would invest 539,000 in Walmart on September 19, 2024 and sell it today you would earn a total of 65,000 from holding Walmart or generate 12.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Walmart vs. Alibaba Group Holding
Performance |
| Timeline |
| Walmart |
| Alibaba Group Holding |
Walmart and Alibaba Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walmart and Alibaba Group
The main advantage of trading using opposite Walmart and Alibaba Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart 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.| Walmart vs. Compania de Transporte | Walmart vs. Harmony Gold Mining | Walmart vs. Agrometal SAI | Walmart vs. United States Steel |
| Alibaba Group vs. Transportadora de Gas | Alibaba Group vs. United States Steel | Alibaba Group vs. Harmony Gold Mining | Alibaba Group vs. Compania de Transporte |
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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