Correlation Between Alibaba Group and Apple

Can any of the company-specific risk be diversified away by investing in both Alibaba Group and Apple 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 Apple 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 Apple Inc DRC, you can compare the effects of market volatilities on Alibaba Group and Apple 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 Apple. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alibaba Group and Apple.

Diversification Opportunities for Alibaba Group and Apple

0.0

Correlation Coefficient

Alibaba Group  Apple

Pay attention - limited upside

The 3 months correlation between Alibaba and Apple is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and Apple Inc DRC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc DRC 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 Apple. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apple Inc DRC has no effect on the direction of Alibaba Group i.e., Alibaba Group and Apple go up and down completely randomly.

Pair Corralation between Alibaba Group and Apple

If you would invest  879,550  in Alibaba Group Holding on February 29, 2024 and sell it today you would earn a total of  235,350  from holding Alibaba Group Holding or generate 26.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Alibaba Group Holding  vs.  Apple Inc DRC

Alibaba Group Holding

Risk-Adjusted Performance

11 of 100

Good

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

Apple Inc DRC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Apple Inc DRC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Apple is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alibaba Group and Apple

The main advantage of trading using opposite Alibaba Group and Apple positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alibaba Group position performs unexpectedly, Apple 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 Apple will offset losses from the drop in Apple's long position.

The idea behind Alibaba Group Holding and Apple Inc DRC 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.