Correlation Between Chewy and Alibaba Group

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

Diversification Opportunities for Chewy and Alibaba Group

0.54
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Chewy and Alibaba is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Chewy Inc 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 Chewy 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 Chewy Inc 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 Chewy i.e., Chewy and Alibaba Group go up and down completely randomly.

Pair Corralation between Chewy and Alibaba Group

Given the investment horizon of 90 days Chewy Inc is expected to generate 1.23 times more return on investment than Alibaba Group. However, Chewy is 1.23 times more volatile than Alibaba Group Holding. It trades about 0.01 of its potential returns per unit of risk. Alibaba Group Holding is currently generating about -0.02 per unit of risk. If you would invest  4,800  in Chewy Inc on April 5, 2022 and sell it today you would lose (1,081)  from holding Chewy Inc or give up 22.52% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Chewy Inc  vs.  Alibaba Group Holding

 Performance (%) 
      Timeline 
Chewy Inc 
Chewy Performance
0 of 100
Over the last 90 days Chewy Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Chewy is not utilizing all of its potentials. The new stock price disturbance, may contribute to short-term losses for the investors.

Chewy Price Channel

Alibaba Group Holding 
Alibaba Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Alibaba Group Holding are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting fundamental drivers, Alibaba Group may actually be approaching a critical reversion point that can send shares even higher in August 2022.

Alibaba Price Channel

Chewy and Alibaba Group Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Chewy and Alibaba Group

The main advantage of trading using opposite Chewy and Alibaba Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chewy 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.
The idea behind Chewy Inc 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.
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.

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