Correlation Between Alibaba Group and Ipower

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

Diversification Opportunities for Alibaba Group and Ipower

  Correlation Coefficient

Weak diversification

The 1 month correlation between Alibaba and Ipower is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and Ipower Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ipower 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 Ipower. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ipower Inc has no effect on the direction of Alibaba Group i.e., Alibaba Group and Ipower go up and down completely randomly.

Pair Corralation between Alibaba Group and Ipower

Given the investment horizon of 90 days Alibaba Group Holding is expected to generate 0.83 times more return on investment than Ipower. However, Alibaba Group Holding is 1.2 times less risky than Ipower. It trades about -0.18 of its potential returns per unit of risk. Ipower Inc is currently generating about -0.25 per unit of risk. If you would invest  11,299  in Alibaba Group Holding on February 23, 2022 and sell it today you would lose (3,052)  from holding Alibaba Group Holding or give up 27.01% of portfolio value over 90 days.
Time Period1 Month [change]
DirectionMoves Together 
StrengthVery Weak
ValuesDaily Returns

Alibaba Group Holding  vs.  Ipower Inc

 Performance (%) 
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 somewhat strong fundamental drivers, Alibaba Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Alibaba Price Channel

Ipower Inc 
Ipower Performance
0 of 100
Over the last 90 days Ipower Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in June 2022. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Ipower Price Channel

Alibaba Group and Ipower Volatility Contrast

 Predicted Return Density 

Pair Trading with Alibaba Group and Ipower

The main advantage of trading using opposite Alibaba Group and Ipower positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alibaba Group position performs unexpectedly, Ipower 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 Ipower will offset losses from the drop in Ipower's long position.
The idea behind Alibaba Group Holding and Ipower 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.

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