Correlation Between Disney and Alibaba Group

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

Diversification Opportunities for Disney and Alibaba Group

0.49
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Disney and Alibaba is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney 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 Disney 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 Walt Disney 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 Disney i.e., Disney and Alibaba Group go up and down completely randomly.

Pair Corralation between Disney and Alibaba Group

Considering the 90-day investment horizon Walt Disney is expected to under-perform the Alibaba Group. But the stock apears to be less risky and, when comparing its historical volatility, Walt Disney is 2.08 times less risky than Alibaba Group. The stock trades about -0.06 of its potential returns per unit of risk. The Alibaba Group Holding is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  12,391  in Alibaba Group Holding on September 5, 2022 and sell it today you would lose (3,385)  from holding Alibaba Group Holding or give up 27.32% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy99.6%
ValuesDaily Returns

Walt Disney  vs.  Alibaba Group Holding

 Performance (%) 
       Timeline  
Walt Disney 
Disney Performance
0 of 100
Over the last 90 days Walt Disney has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's forward indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Disney 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 weak fundamental drivers, Alibaba Group may actually be approaching a critical reversion point that can send shares even higher in January 2023.

Alibaba Price Channel

Disney and Alibaba Group Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Disney and Alibaba Group

The main advantage of trading using opposite Disney and Alibaba Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney 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.
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The idea behind Walt Disney 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.
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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.

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