Correlation Between NVIDIA and Alibaba Group
Can any of the company-specific risk be diversified away by investing in both NVIDIA 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 NVIDIA and Alibaba Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NVIDIA and Alibaba Group Holding, you can compare the effects of market volatilities on NVIDIA 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 NVIDIA with a short position of Alibaba Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of NVIDIA and Alibaba Group.
Diversification Opportunities for NVIDIA and Alibaba Group
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between NVIDIA and Alibaba is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA 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 NVIDIA 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 NVIDIA 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 NVIDIA i.e., NVIDIA and Alibaba Group go up and down completely randomly.
Pair Corralation between NVIDIA and Alibaba Group
Given the investment horizon of 90 days NVIDIA is expected to generate 2.1 times more return on investment than Alibaba Group. However, NVIDIA is 2.1 times more volatile than Alibaba Group Holding. It trades about 0.15 of its potential returns per unit of risk. Alibaba Group Holding is currently generating about -0.07 per unit of risk. If you would invest 69,449 in NVIDIA on January 20, 2024 and sell it today you would earn a total of 15,222 from holding NVIDIA or generate 21.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NVIDIA vs. Alibaba Group Holding
Performance |
| Timeline |
| NVIDIA |
| Alibaba Group Holding |
NVIDIA and Alibaba Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NVIDIA and Alibaba Group
The main advantage of trading using opposite NVIDIA and Alibaba Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NVIDIA 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.| NVIDIA vs. Intel | NVIDIA vs. Taiwan Semiconductor Manufacturing | NVIDIA vs. Marvell Technology Group | NVIDIA vs. Micron Technology |
| 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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