Correlation Between Alibaba Group and Chewy

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Alibaba Group and Chewy 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 Chewy 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 Chewy Inc, you can compare the effects of market volatilities on Alibaba Group and Chewy 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 Chewy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alibaba Group and Chewy.

Diversification Opportunities for Alibaba Group and Chewy

0.46
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Alibaba and Chewy is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and Chewy Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chewy Inc 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 Chewy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chewy Inc has no effect on the direction of Alibaba Group i.e., Alibaba Group and Chewy go up and down completely randomly.

Pair Corralation between Alibaba Group and Chewy

Given the investment horizon of 90 days Alibaba Group Holding is expected to under-perform the Chewy. But the stock apears to be less risky and, when comparing its historical volatility, Alibaba Group Holding is 1.22 times less risky than Chewy. The stock trades about -0.04 of its potential returns per unit of risk. The Chewy Inc is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  5,721  in Chewy Inc on May 12, 2022 and sell it today you would lose (836.00)  from holding Chewy Inc or give up 14.61% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Alibaba Group Holding  vs.  Chewy Inc

 Performance (%) 
       Timeline  
Alibaba Group Holding 
Alibaba Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Alibaba Group Holding are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental drivers, Alibaba Group sustained solid returns over the last few months and may actually be approaching a breakup point.

Alibaba Price Channel

Chewy Inc 
Chewy Performance
15 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Chewy Inc are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Chewy showed solid returns over the last few months and may actually be approaching a breakup point.

Chewy Price Channel

Alibaba Group and Chewy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Alibaba Group and Chewy

The main advantage of trading using opposite Alibaba Group and Chewy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alibaba Group position performs unexpectedly, Chewy 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 Chewy will offset losses from the drop in Chewy's long position.
The idea behind Alibaba Group Holding and Chewy Inc 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 Transaction History module to view history of all your transactions and understand their impact on performance.

Other Complementary Tools

Idea Analyzer
Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas
Go
CEO Directory
Screen CEOs from public companies around the world
Go
Watchlist Optimization
Optimize watchlists to build efficient portfolio or rebalance existing positions based on mean-variance optimization algorithm
Go
Performance Analysis
Check effects of mean-variance optimization against your current asset allocation
Go
Companies Directory
Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals
Go
Equity Valuation
Check real value of public entities based on technical and fundamental data
Go
Content Syndication
Quickly integrate customizable finance content to your own investment portal
Go
Technical Analysis
Check basic technical indicators and analysis based on most latest market data
Go
Alpha Finder
Use alpha and beta coefficients to find investment opportunities after accounting for the risk
Go
Analyst Recommendations
Analyst recommendations and target price estimates broken down by several categories
Go