Correlation Between Southern and Alibaba Group

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Can any of the company-specific risk be diversified away by investing in both Southern 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 Southern and Alibaba Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southern Co and Alibaba Group Holding, you can compare the effects of market volatilities on Southern 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 Southern with a short position of Alibaba Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern and Alibaba Group.

Diversification Opportunities for Southern and Alibaba Group

-0.19
  Correlation Coefficient

Good diversification

The 3 months correlation between Southern and Alibaba is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Southern Co 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 Southern 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 Southern Co 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 Southern i.e., Southern and Alibaba Group go up and down completely randomly.

Pair Corralation between Southern and Alibaba Group

Given the investment horizon of 90 days Southern Co is expected to generate 0.35 times more return on investment than Alibaba Group. However, Southern Co is 2.87 times less risky than Alibaba Group. It trades about 0.05 of its potential returns per unit of risk. Alibaba Group Holding is currently generating about 0.0 per unit of risk. If you would invest  5,412  in Southern Co on December 30, 2023 and sell it today you would earn a total of  204.00  from holding Southern Co or generate 3.77% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy15.59%
ValuesDaily Returns

Southern Co  vs.  Alibaba Group Holding

 Performance 
       Timeline  
Southern 

Risk-Adjusted Performance

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Low
 
High
Very Weak
Over the last 90 days Southern Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Southern is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.
Alibaba Group Holding 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
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 latest stock price disturbance, may contribute to short-term losses for the investors.

Southern and Alibaba Group Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Southern and Alibaba Group

The main advantage of trading using opposite Southern and Alibaba Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern 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 Southern Co 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.
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.

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