Correlation Between Alibaba Group and Boeing
Can any of the company-specific risk be diversified away by investing in both Alibaba Group and Boeing 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 Boeing 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 The Boeing, you can compare the effects of market volatilities on Alibaba Group and Boeing 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 Boeing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alibaba Group and Boeing.
Diversification Opportunities for Alibaba Group and Boeing
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Alibaba and Boeing is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and The Boeing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boeing 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 Boeing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boeing has no effect on the direction of Alibaba Group i.e., Alibaba Group and Boeing go up and down completely randomly.
Pair Corralation between Alibaba Group and Boeing
Given the investment horizon of 90 days Alibaba Group Holding is expected to generate 1.37 times more return on investment than Boeing. However, Alibaba Group is 1.37 times more volatile than The Boeing. It trades about 0.13 of its potential returns per unit of risk. The Boeing is currently generating about -0.49 per unit of risk. If you would invest 7,148 in Alibaba Group Holding on January 26, 2024 and sell it today you would earn a total of 315.00 from holding Alibaba Group Holding or generate 4.41% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Alibaba Group Holding vs. The Boeing
Performance |
Timeline |
Alibaba Group Holding |
Boeing |
Alibaba Group and Boeing Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Alibaba Group and Boeing
The main advantage of trading using opposite Alibaba Group and Boeing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alibaba Group position performs unexpectedly, Boeing 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 Boeing will offset losses from the drop in Boeing's long position.The idea behind Alibaba Group Holding and The Boeing 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.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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
Other Complementary Tools
Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules |