Correlation Between Analog Devices and Alibaba Group

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

Diversification Opportunities for Analog Devices and Alibaba Group

-0.18
  Correlation Coefficient

Good diversification

The 3 months correlation between Analog and Alibaba is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices 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 Analog Devices 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 Analog Devices 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 Analog Devices i.e., Analog Devices and Alibaba Group go up and down completely randomly.

Pair Corralation between Analog Devices and Alibaba Group

Considering the 90-day investment horizon Analog Devices is expected to generate 0.52 times more return on investment than Alibaba Group. However, Analog Devices is 1.94 times less risky than Alibaba Group. It trades about 0.03 of its potential returns per unit of risk. Alibaba Group Holding is currently generating about -0.06 per unit of risk. If you would invest  11,880  in Analog Devices on June 30, 2022 and sell it today you would earn a total of  2,416  from holding Analog Devices or generate 20.34% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Analog Devices  vs.  Alibaba Group Holding

 Performance (%) 
       Timeline  
Analog Devices 
Analog Performance
0 of 100
Over the last 90 days Analog Devices has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Analog Devices is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Analog Price Channel

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 abnormal performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in October 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

Alibaba Price Channel

Analog Devices and Alibaba Group Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Analog Devices and Alibaba Group

The main advantage of trading using opposite Analog Devices and Alibaba Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Analog Devices 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.
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The idea behind Analog Devices 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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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.

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