Correlation Between Alibaba Group and Jd Inc

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

Diversification Opportunities for Alibaba Group and Jd Inc

0.88
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Alibaba and Jd Inc is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and Jd Inc ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jd Inc ADR 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 Jd Inc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jd Inc ADR has no effect on the direction of Alibaba Group i.e., Alibaba Group and Jd Inc go up and down completely randomly.

Pair Corralation between Alibaba Group and Jd Inc

Given the investment horizon of 90 days Alibaba Group Holding is expected to generate 1.43 times more return on investment than Jd Inc. However, Alibaba Group is 1.43 times more volatile than Jd Inc ADR. It trades about 0.17 of its potential returns per unit of risk. Jd Inc ADR is currently generating about 0.17 per unit of risk. If you would invest  9,750  in Alibaba Group Holding on April 3, 2022 and sell it today you would earn a total of  1,850  from holding Alibaba Group Holding or generate 18.97% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Alibaba Group Holding  vs.  Jd Inc ADR

 Performance (%) 
      Timeline 
Alibaba Group Holding 
Alibaba Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Alibaba Group Holding are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Alibaba Group is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Alibaba Price Channel

Jd Inc ADR 
Jd Inc Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Jd Inc ADR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sluggish fundamental indicators, Jd Inc may actually be approaching a critical reversion point that can send shares even higher in August 2022.

Structure and Payout Changes

Payout Ratio
0.22
Dividend Date
2022-06-14
Ex Dividend Date
2022-05-19

Jd Inc Price Channel

Alibaba Group and Jd Inc Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Alibaba Group and Jd Inc

The main advantage of trading using opposite Alibaba Group and Jd Inc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alibaba Group position performs unexpectedly, Jd Inc 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 Jd Inc will offset losses from the drop in Jd Inc's long position.
The idea behind Alibaba Group Holding and Jd Inc ADR 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

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