Correlation Between Alibaba Group and FedEx

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

Diversification Opportunities for Alibaba Group and FedEx

-0.63

Correlation Coefficient

Alibaba Group  FedEx

Excellent diversification

The 3 months correlation between Alibaba and FedEx is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and FedEx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FedEx 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 FedEx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FedEx has no effect on the direction of Alibaba Group i.e., Alibaba Group and FedEx go up and down completely randomly.

Pair Corralation between Alibaba Group and FedEx

Assuming the 90 days trading horizon Alibaba Group Holding is expected to generate 1.31 times more return on investment than FedEx. However, Alibaba Group is 1.31 times more volatile than FedEx. It trades about 0.07 of its potential returns per unit of risk. FedEx is currently generating about 0.06 per unit of risk. If you would invest  1,707  in Alibaba Group Holding on September 12, 2024 and sell it today you would earn a total of  196.00  from holding Alibaba Group Holding or generate 11.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Alibaba Group Holding  vs.  FedEx

Alibaba Group Holding

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alibaba Group Holding are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Alibaba Group sustained solid returns over the last few months and may actually be approaching a breakup point.

FedEx

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in FedEx are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, FedEx may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Alibaba Group and FedEx

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

The idea behind Alibaba Group Holding and FedEx 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..