Correlation Between Hyster Yale and Alibaba Group

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

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

Diversification Opportunities for Hyster Yale and Alibaba Group

0.6

Correlation Coefficient

Hyster Yale  Alibaba Group

Poor diversification

The 3 months correlation between Hyster and Alibaba is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Hyster Yale Materials Handling 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 Hyster Yale 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 Hyster Yale Materials Handling 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 Hyster Yale i.e., Hyster Yale and Alibaba Group go up and down completely randomly.

Pair Corralation between Hyster Yale and Alibaba Group

Assuming the 90 days trading horizon Hyster Yale Materials Handling is expected to under-perform the Alibaba Group. But the stock apears to be less risky and, when comparing its historical volatility, Hyster Yale Materials Handling is 1.41 times less risky than Alibaba Group. The stock trades about -0.19 of its potential returns per unit of risk. The Alibaba Group Holding is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,003  in Alibaba Group Holding on September 23, 2024 and sell it today you would lose (15.00) from holding Alibaba Group Holding or give up 1.5% of portfolio value over 90 days.

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

Hyster Yale Materials Handling  vs.  Alibaba Group Holding

Hyster Yale Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hyster Yale Materials Handling has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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 nearly stable basic indicators, Alibaba Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Hyster Yale and Alibaba Group

The main advantage of trading using opposite Hyster Yale and Alibaba Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hyster Yale 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.

The idea behind Hyster Yale Materials Handling and Alibaba Group Holding 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.