Correlation Between Alibaba Group and Overstockcom

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

Diversification Opportunities for Alibaba Group and Overstockcom

-0.08

Correlation Coefficient

Alibaba Group  Overstockcom

Good diversification

The 3 months correlation between Alibaba and Overstockcom is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and Overstockcom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Overstockcom 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 Overstockcom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Overstockcom has no effect on the direction of Alibaba Group i.e., Alibaba Group and Overstockcom go up and down completely randomly.

Pair Corralation between Alibaba Group and Overstockcom

If you would invest  8,176  in Alibaba Group Holding on August 25, 2024 and sell it today you would earn a total of  137.00  from holding Alibaba Group Holding or generate 1.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

Alibaba Group Holding  vs.  Overstockcom

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.

Overstockcom

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Overstockcom has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Overstockcom is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Alibaba Group and Overstockcom

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

The idea behind Alibaba Group Holding and Overstockcom 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.