Correlation Between Alibaba Group and Home Depot
Can any of the company-specific risk be diversified away by investing in both Alibaba Group and Home Depot 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 Home Depot 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 Home Depot, you can compare the effects of market volatilities on Alibaba Group and Home Depot 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 Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alibaba Group and Home Depot.
Diversification Opportunities for Alibaba Group and Home Depot
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Alibaba and Home is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot 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 Home Depot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Depot has no effect on the direction of Alibaba Group i.e., Alibaba Group and Home Depot go up and down completely randomly.
Pair Corralation between Alibaba Group and Home Depot
Given the investment horizon of 90 days Alibaba Group Holding is expected to generate 1.36 times more return on investment than Home Depot. However, Alibaba Group is 1.36 times more volatile than Home Depot. It trades about -0.03 of its potential returns per unit of risk. Home Depot is currently generating about -0.18 per unit of risk. If you would invest 7,651 in Alibaba Group Holding on January 25, 2024 and sell it today you would lose (233.00) from holding Alibaba Group Holding or give up 3.05% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Alibaba Group Holding vs. Home Depot
Performance |
Timeline |
Alibaba Group Holding |
Home Depot |
Alibaba Group and Home Depot Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Alibaba Group and Home Depot
The main advantage of trading using opposite Alibaba Group and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alibaba Group position performs unexpectedly, Home Depot 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 Home Depot will offset losses from the drop in Home Depot's long position.Alibaba Group vs. Sea | Alibaba Group vs. Vipshop Holdings Limited | Alibaba Group vs. Amazon Inc | Alibaba Group vs. JD Inc Adr |
Home Depot vs. Floor Decor Holdings | Home Depot vs. LL Flooring Holdings | Home Depot vs. Arhaus Inc | Home Depot vs. Haverty Furniture Companies |
Check out your portfolio center.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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
Other Complementary Tools
Stocks Directory Find actively traded stocks across global markets | |
AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals |