Correlation Between MBIA and Alibaba Group
Can any of the company-specific risk be diversified away by investing in both MBIA 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 MBIA and Alibaba Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MBIA Inc and Alibaba Group Holding, you can compare the effects of market volatilities on MBIA 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 MBIA with a short position of Alibaba Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of MBIA and Alibaba Group.
Diversification Opportunities for MBIA and Alibaba Group
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between MBIA and Alibaba is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding MBIA Inc 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 MBIA 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 MBIA Inc 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 MBIA i.e., MBIA and Alibaba Group go up and down completely randomly.
Pair Corralation between MBIA and Alibaba Group
Considering the 90-day investment horizon MBIA is expected to generate 1.36 times less return on investment than Alibaba Group. In addition to that, MBIA is 1.76 times more volatile than Alibaba Group Holding. It trades about 0.04 of its total potential returns per unit of risk. Alibaba Group Holding is currently generating about 0.1 per unit of volatility. If you would invest 430,145 in Alibaba Group Holding on January 20, 2024 and sell it today you would earn a total of 383,655 from holding Alibaba Group Holding or generate 89.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 96.79% |
| Values | Daily Returns |
MBIA Inc vs. Alibaba Group Holding
Performance |
| Timeline |
| MBIA Inc |
| Alibaba Group Holding |
MBIA and Alibaba Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MBIA and Alibaba Group
The main advantage of trading using opposite MBIA and Alibaba Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MBIA 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 MBIA Inc 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.| Alibaba Group vs. Harmony Gold Mining | Alibaba Group vs. Compania de Transporte | Alibaba Group vs. B Gaming SA |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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