Correlation Between Alibaba Group and Consultatio

Can any of the company-specific risk be diversified away by investing in both Alibaba Group and Consultatio 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 Group and Consultatio into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alibaba Group Holding and Consultatio SA, you can compare the effects of market volatilities on Alibaba Group and Consultatio 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 Group with a short position of Consultatio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alibaba Group and Consultatio.

Diversification Opportunities for Alibaba Group and Consultatio

-0.66

Correlation Coefficient

Alibaba Group  Consultatio

Excellent diversification

The 3 months correlation between Alibaba and Consultatio is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and Consultatio SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consultatio SA and Alibaba Group 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 Group Holding are associated (or correlated) with Consultatio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consultatio SA has no effect on the direction of Alibaba Group i.e., Alibaba Group and Consultatio go up and down completely randomly.

Pair Corralation between Alibaba Group and Consultatio

Assuming the 90 days trading horizon Alibaba Group Holding is expected to under-perform the Consultatio. In addition to that, Alibaba Group is 1.06 times more volatile than Consultatio SA. It trades about -0.02 of its total potential returns per unit of risk. Consultatio SA is currently generating about -0.01 per unit of volatility. If you would invest  242,500  in Consultatio SA on September 14, 2024 and sell it today you would lose (12,000) from holding Consultatio SA or give up 4.95% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Alibaba Group Holding  vs.  Consultatio SA

Alibaba Group Holding

Risk-Adjusted Performance

0 of 100

Very Weak

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

Consultatio SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Alibaba Group and Consultatio

The main advantage of trading using opposite Alibaba Group and Consultatio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alibaba Group position performs unexpectedly, Consultatio 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 Consultatio will offset losses from the drop in Consultatio's long position.

The idea behind Alibaba Group Holding and Consultatio SA 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.