Correlation Between Carvana Co and Alibaba Group

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Carvana Co 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 Carvana Co and Alibaba Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Carvana Co Cl and Alibaba Group Holding, you can compare the effects of market volatilities on Carvana Co 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 Carvana Co with a short position of Alibaba Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carvana Co and Alibaba Group.

Diversification Opportunities for Carvana Co and Alibaba Group

-0.53
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Carvana and Alibaba is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Carvana Co Cl 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 Carvana Co 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 Carvana Co Cl 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 Carvana Co i.e., Carvana Co and Alibaba Group go up and down completely randomly.

Pair Corralation between Carvana Co and Alibaba Group

Given the investment horizon of 90 days Carvana Co Cl is expected to generate 3.46 times more return on investment than Alibaba Group. However, Carvana Co is 3.46 times more volatile than Alibaba Group Holding. It trades about 0.37 of its potential returns per unit of risk. Alibaba Group Holding is currently generating about -0.18 per unit of risk. If you would invest  2,225  in Carvana Co Cl on May 19, 2022 and sell it today you would earn a total of  2,737  from holding Carvana Co Cl or generate 123.01% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Carvana Co Cl  vs.  Alibaba Group Holding

 Performance (%) 
       Timeline  
Carvana Co Cl 
Carvana Performance
8 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Carvana Co Cl are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Carvana Co sustained solid returns over the last few months and may actually be approaching a breakup point.

Carvana 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 September 2022.

Alibaba Price Channel

Carvana Co and Alibaba Group Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Carvana Co and Alibaba Group

The main advantage of trading using opposite Carvana Co and Alibaba Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carvana Co 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 Carvana Co Cl 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.

Other Complementary Tools

Price Ceiling Movement
Calculate and plot Price Ceiling Movement for different equity instruments
Go
Idea Breakdown
Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes
Go
Positions Ratings
Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance
Go
Price Exposure Probability
Analyze equity upside and downside potential for a given time horizon across multiple markets
Go
Bollinger Bands
Use Bollinger Bands indicator to analyze target price for a given investing horizon
Go
Cryptocurrency Center
Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency
Go