Correlation Between United States and Alibaba Group
Can any of the company-specific risk be diversified away by investing in both United States 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 United States and Alibaba Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United States Steel and Alibaba Group Holding, you can compare the effects of market volatilities on United States 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 United States with a short position of Alibaba Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and Alibaba Group.
Diversification Opportunities for United States and Alibaba Group
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between United and Alibaba is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel 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 United States 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 United States Steel 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 United States i.e., United States and Alibaba Group go up and down completely randomly.
Pair Corralation between United States and Alibaba Group
Given the investment horizon of 90 days United States is expected to generate 1.14 times less return on investment than Alibaba Group. But when comparing it to its historical volatility, United States Steel is 1.21 times less risky than Alibaba Group. It trades about 0.29 of its potential returns per unit of risk. Alibaba Group Holding is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 1,127,500 in Alibaba Group Holding on November 6, 2024 and sell it today you would earn a total of 172,500 from holding Alibaba Group Holding or generate 15.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
United States Steel vs. Alibaba Group Holding
Performance |
| Timeline |
| United States Steel |
| Alibaba Group Holding |
United States and Alibaba Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United States and Alibaba Group
The main advantage of trading using opposite United States and Alibaba Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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.| United States vs. Pfizer Inc | United States vs. Instituto Rosenbusch SA | United States vs. Sociedad Comercial del | United States vs. Ledesma SAAI |
| Alibaba Group vs. Amazon Inc | Alibaba Group vs. American Express Co | Alibaba Group vs. QUALCOMM Incorporated | Alibaba Group vs. United States Steel |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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