Correlation Between Alibaba Group and A1EN34

Can any of the company-specific risk be diversified away by investing in both Alibaba Group and A1EN34 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 A1EN34 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 A1EN34, you can compare the effects of market volatilities on Alibaba Group and A1EN34 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 A1EN34. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alibaba Group and A1EN34.

Diversification Opportunities for Alibaba Group and A1EN34

-0.64

Correlation Coefficient

Alibaba Group  A1EN34

Excellent diversification

The 3 months correlation between Alibaba and A1EN34 is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and A1EN34 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on A1EN34 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 A1EN34. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of A1EN34 has no effect on the direction of Alibaba Group i.e., Alibaba Group and A1EN34 go up and down completely randomly.

Pair Corralation between Alibaba Group and A1EN34

Assuming the 90 days trading horizon Alibaba Group Holding is expected to under-perform the A1EN34. In addition to that, Alibaba Group is 28.39 times more volatile than A1EN34. It trades about -0.04 of its total potential returns per unit of risk. A1EN34 is currently generating about 0.13 per unit of volatility. If you would invest  25,454  in A1EN34 on September 28, 2024 and sell it today you would earn a total of  191.00  from holding A1EN34 or generate 0.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Alibaba Group Holding  vs.  A1EN34

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 latest weak performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

A1EN34

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in A1EN34 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, A1EN34 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 A1EN34

The main advantage of trading using opposite Alibaba Group and A1EN34 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alibaba Group position performs unexpectedly, A1EN34 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 A1EN34 will offset losses from the drop in A1EN34's long position.

The idea behind Alibaba Group Holding and A1EN34 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.