Correlation Between Rocket Lab and Alibaba Group

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

Diversification Opportunities for Rocket Lab and Alibaba Group

-0.64
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Rocket and Alibaba is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Rocket Lab USA 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 Rocket Lab 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 Rocket Lab USA 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 Rocket Lab i.e., Rocket Lab and Alibaba Group go up and down completely randomly.

Pair Corralation between Rocket Lab and Alibaba Group

Given the investment horizon of 90 days Rocket Lab USA is expected to generate 1.29 times more return on investment than Alibaba Group. However, Rocket Lab is 1.29 times more volatile than Alibaba Group Holding. It trades about -0.02 of its potential returns per unit of risk. Alibaba Group Holding is currently generating about -0.05 per unit of risk. If you would invest  974.00  in Rocket Lab USA on June 27, 2022 and sell it today you would lose (562.00)  from holding Rocket Lab USA or give up 57.7% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy92.59%
ValuesDaily Returns

Rocket Lab USA  vs.  Alibaba Group Holding

 Performance (%) 
       Timeline  
Rocket Lab USA 
Rocket Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Rocket Lab USA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat sluggish essential indicators, Rocket Lab may actually be approaching a critical reversion point that can send shares even higher in October 2022.

Rocket Price Channel

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 unsteady performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in October 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

Alibaba Price Channel

Rocket Lab and Alibaba Group Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Rocket Lab and Alibaba Group

The main advantage of trading using opposite Rocket Lab and Alibaba Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rocket Lab 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.
Rocket Lab vs. Sigma Lithium Corp
The idea behind Rocket Lab USA 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.
Alibaba Group vs. BUSHVELD MINERALS LTD
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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