Correlation Between Travelers Companies and Alibaba Group

Can any of the company-specific risk be diversified away by investing in both Travelers Companies 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 Travelers Companies and Alibaba Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The Travelers Companies and Alibaba Group Holding, you can compare the effects of market volatilities on Travelers Companies 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 Travelers Companies with a short position of Alibaba Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Travelers Companies and Alibaba Group.

Diversification Opportunities for Travelers Companies and Alibaba Group

0.09

Correlation Coefficient

Travelers Companies  Alibaba Group

Significant diversification

The 3 months correlation between Travelers and Alibaba is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding The Travelers Companies 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 Travelers Companies 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 The Travelers Companies 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 Travelers Companies i.e., Travelers Companies and Alibaba Group go up and down completely randomly.

Pair Corralation between Travelers Companies and Alibaba Group

Considering the 90-day investment horizon The Travelers Companies is expected to under-perform the Alibaba Group. In addition to that, Travelers Companies is 1.15 times more volatile than Alibaba Group Holding. It trades about -0.12 of its total potential returns per unit of risk. Alibaba Group Holding is currently generating about 0.13 per unit of volatility. 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	Insignificant
Accuracy	100.0%
Values	Daily Returns

The Travelers Companies  vs.  Alibaba Group Holding

The Travelers Companies

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Travelers Companies are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Travelers Companies is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Alibaba Group Holding

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alibaba Group Holding are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Alibaba Group is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Travelers Companies and Alibaba Group

The main advantage of trading using opposite Travelers Companies and Alibaba Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Travelers Companies 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 The Travelers Companies 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.

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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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.