Correlation Between Alibaba Group and Delivery Hero

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

Diversification Opportunities for Alibaba Group and Delivery Hero

0.76

Correlation Coefficient

Alibaba Group  Delivery Hero

Poor diversification

The 3 months correlation between Alibaba and Delivery is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and Delivery Hero SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delivery Hero SE 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 Delivery Hero. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delivery Hero SE has no effect on the direction of Alibaba Group i.e., Alibaba Group and Delivery Hero go up and down completely randomly.

Pair Corralation between Alibaba Group and Delivery Hero

Assuming the 90 days horizon Alibaba Group is expected to generate 2.18 times less return on investment than Delivery Hero. In addition to that, Alibaba Group is 1.84 times more volatile than Delivery Hero SE. It trades about 0.04 of its total potential returns per unit of risk. Delivery Hero SE is currently generating about 0.16 per unit of volatility. If you would invest  311.00  in Delivery Hero SE on August 30, 2024 and sell it today you would earn a total of  87.00  from holding Delivery Hero SE or generate 27.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Alibaba Group Holding  vs.  Delivery Hero SE

Alibaba Group Holding

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alibaba Group Holding are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Alibaba Group may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Delivery Hero SE

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Delivery Hero SE are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical indicators, Delivery Hero showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alibaba Group and Delivery Hero

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

The idea behind Alibaba Group Holding and Delivery Hero SE 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.