Correlation Between Applied Materials and Alibaba Group

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

Diversification Opportunities for Applied Materials and Alibaba Group

-0.13
  Correlation Coefficient

Good diversification

The 3 months correlation between Applied and Alibaba is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials 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 Applied Materials 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 Applied Materials 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 Applied Materials i.e., Applied Materials and Alibaba Group go up and down completely randomly.

Pair Corralation between Applied Materials and Alibaba Group

Given the investment horizon of 90 days Applied Materials is expected to under-perform the Alibaba Group. In addition to that, Applied Materials is 1.02 times more volatile than Alibaba Group Holding. It trades about -0.19 of its total potential returns per unit of risk. Alibaba Group Holding is currently generating about -0.12 per unit of volatility. If you would invest  9,034  in Alibaba Group Holding on June 30, 2022 and sell it today you would lose (1,247)  from holding Alibaba Group Holding or give up 13.8% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy97.62%
ValuesDaily Returns

Applied Materials  vs.  Alibaba Group Holding

 Performance (%) 
       Timeline  
Applied Materials 
Applied Performance
0 of 100
Over the last 90 days Applied Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Applied Materials is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Applied 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

Applied Materials and Alibaba Group Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Applied Materials and Alibaba Group

The main advantage of trading using opposite Applied Materials and Alibaba Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials 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.
Applied Materials vs. Sunrun Inc
The idea behind Applied Materials 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. Clearwater Paper Corp
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

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