Correlation Between Apple and Alibaba Group
Can any of the company-specific risk be diversified away by investing in both Apple 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 Apple and Alibaba Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and Alibaba Group Holding, you can compare the effects of market volatilities on Apple 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 Apple with a short position of Alibaba Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Alibaba Group.
Diversification Opportunities for Apple and Alibaba Group
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Apple and Alibaba is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc 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 Apple 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 Apple Inc 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 Apple i.e., Apple and Alibaba Group go up and down completely randomly.
Pair Corralation between Apple and Alibaba Group
Given the investment horizon of 90 days Apple Inc is expected to generate 1.15 times more return on investment than Alibaba Group. However, Apple is 1.15 times more volatile than Alibaba Group Holding. It trades about -0.19 of its potential returns per unit of risk. Alibaba Group Holding is currently generating about -0.23 per unit of risk. If you would invest 17,867 in Apple Inc on January 20, 2024 and sell it today you would lose (1,163) from holding Apple Inc or give up 6.51% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Apple Inc vs. Alibaba Group Holding
Performance |
| Timeline |
| Apple Inc |
| Alibaba Group Holding |
Apple and Alibaba Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and Alibaba Group
The main advantage of trading using opposite Apple and Alibaba Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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 Apple Inc 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.| Alibaba Group vs. Shoe Carnival | Alibaba Group vs. Hibbett Sports | Alibaba Group vs. Citi Trends | Alibaba Group vs. Zumiez Inc |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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