Correlation Between Alibaba Group and Fidelity Total

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

Diversification Opportunities for Alibaba Group and Fidelity Total

-0.42
  Correlation Coefficient

Very good diversification

The 3 months correlation between Alibaba and Fidelity is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and Fidelity Total Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Total Market 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 Fidelity Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Total Market has no effect on the direction of Alibaba Group i.e., Alibaba Group and Fidelity Total go up and down completely randomly.

Pair Corralation between Alibaba Group and Fidelity Total

Given the investment horizon of 90 days Alibaba Group Holding is expected to under-perform the Fidelity Total. In addition to that, Alibaba Group is 2.68 times more volatile than Fidelity Total Market. It trades about -0.1 of its total potential returns per unit of risk. Fidelity Total Market is currently generating about 0.43 per unit of volatility. If you would invest  1,352  in Fidelity Total Market on May 16, 2022 and sell it today you would earn a total of  157.00  from holding Fidelity Total Market or generate 11.61% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Alibaba Group Holding  vs.  Fidelity Total Market

 Performance (%) 
       Timeline  
Alibaba Group Holding 
Alibaba Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Alibaba Group Holding are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Alibaba Group sustained solid returns over the last few months and may actually be approaching a breakup point.

Alibaba Price Channel

Fidelity Total Market 
Fidelity Performance
6 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Total Market are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Fidelity Total may actually be approaching a critical reversion point that can send shares even higher in September 2022.

Fidelity Price Channel

Alibaba Group and Fidelity Total Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Alibaba Group and Fidelity Total

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

Fidelity Total Market

Pair trading matchups for Fidelity Total

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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.

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