Correlation Between Transportadora and Alibaba Group

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

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

Diversification Opportunities for Transportadora and Alibaba Group

-0.87

Correlation Coefficient

Transportadora  Alibaba Group

Pay attention - limited upside

The 3 months correlation between Transportadora and Alibaba is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Transportadora de Gas 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 Transportadora 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 Transportadora de Gas 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 Transportadora i.e., Transportadora and Alibaba Group go up and down completely randomly.

Pair Corralation between Transportadora and Alibaba Group

Assuming the 90 days trading horizon Transportadora de Gas is expected to generate 0.78 times more return on investment than Alibaba Group. However, Transportadora de Gas is 1.29 times less risky than Alibaba Group. It trades about 0.14 of its potential returns per unit of risk. Alibaba Group Holding is currently generating about -0.02 per unit of risk. If you would invest  530,000  in Transportadora de Gas on September 16, 2024 and sell it today you would earn a total of  119,000  from holding Transportadora de Gas or generate 22.45% return on investment over 90 days.

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

Transportadora de Gas  vs.  Alibaba Group Holding

Transportadora de Gas

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Transportadora de Gas are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Transportadora sustained solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Transportadora and Alibaba Group

The main advantage of trading using opposite Transportadora and Alibaba Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transportadora 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 Transportadora de Gas 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.