Correlation Between Alibaba Group and Edwards Lifesciences

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

Diversification Opportunities for Alibaba Group and Edwards Lifesciences

0.13
  Correlation Coefficient

Average diversification

The 3 months correlation between Alibaba and Edwards is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and Edwards Lifesciences Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edwards Lifesciences Corp 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 Edwards Lifesciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edwards Lifesciences Corp has no effect on the direction of Alibaba Group i.e., Alibaba Group and Edwards Lifesciences go up and down completely randomly.

Pair Corralation between Alibaba Group and Edwards Lifesciences

Given the investment horizon of 90 days Alibaba Group Holding is expected to under-perform the Edwards Lifesciences. But the stock apears to be less risky and, when comparing its historical volatility, Alibaba Group Holding is 1.14 times less risky than Edwards Lifesciences. The stock trades about -0.08 of its potential returns per unit of risk. The Edwards Lifesciences Corp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  7,734  in Edwards Lifesciences Corp on December 27, 2022 and sell it today you would earn a total of  358.00  from holding Edwards Lifesciences Corp or generate 4.63% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Alibaba Group Holding  vs.  Edwards Lifesciences Corp

 Performance (%) 
       Timeline  
Alibaba Group Holding 

Alibaba Performance

0 of 100

Over the last 90 days Alibaba Group Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Alibaba Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Edwards Lifesciences Corp 

Edwards Performance

6 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in Edwards Lifesciences Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Edwards Lifesciences may actually be approaching a critical reversion point that can send shares even higher in April 2023.

Alibaba Group and Edwards Lifesciences Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Alibaba Group and Edwards Lifesciences

The main advantage of trading using opposite Alibaba Group and Edwards Lifesciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alibaba Group position performs unexpectedly, Edwards Lifesciences 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 Edwards Lifesciences will offset losses from the drop in Edwards Lifesciences' long position.
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The idea behind Alibaba Group Holding and Edwards Lifesciences Corp 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.
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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.

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