Correlation Between Target Corp and Alibaba Group

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

Diversification Opportunities for Target Corp and Alibaba Group

-0.48
  Correlation Coefficient

Very good diversification

The 3 months correlation between Target and Alibaba is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Target Corp 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 Target Corp 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 Target Corp 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 Target Corp i.e., Target Corp and Alibaba Group go up and down completely randomly.

Pair Corralation between Target Corp and Alibaba Group

Considering the 90-day investment horizon Target Corp is expected to generate 0.89 times more return on investment than Alibaba Group. However, Target Corp is 1.12 times less risky than Alibaba Group. It trades about -0.21 of its potential returns per unit of risk. Alibaba Group Holding is currently generating about -0.28 per unit of risk. If you would invest  16,484  in Target Corp on July 3, 2022 and sell it today you would lose (1,645)  from holding Target Corp or give up 9.98% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Target Corp  vs.  Alibaba Group Holding

 Performance (%) 
       Timeline  
Target Corp 
Target Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Target Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Target Corp is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

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

Alibaba Price Channel

Target Corp and Alibaba Group Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Target Corp and Alibaba Group

The main advantage of trading using opposite Target Corp and Alibaba Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Target Corp 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.
Target Corp vs. Amazon Inc
The idea behind Target Corp 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. Amazon Inc
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

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