Correlation Between Alibaba Group and JD

Can any of the company-specific risk be diversified away by investing in both Alibaba Group and JD 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 Alibaba Group and JD into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alibaba Group Holdings and JD Inc, you can compare the effects of market volatilities on Alibaba Group and JD 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 Alibaba Group with a short position of JD. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alibaba Group and JD.

Diversification Opportunities for Alibaba Group and JD

0.79

Correlation Coefficient

Alibaba Group  JD

Poor diversification

The 3 months correlation between Alibaba and JD is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holdings and JD Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JD Inc and Alibaba Group 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 Alibaba Group Holdings are associated (or correlated) with JD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JD Inc has no effect on the direction of Alibaba Group i.e., Alibaba Group and JD go up and down completely randomly.

Pair Corralation between Alibaba Group and JD

Assuming the 90 days trading horizon Alibaba Group Holdings is expected to generate 1.05 times more return on investment than JD. However, Alibaba Group is 1.05 times more volatile than JD Inc. It trades about 0.01 of its potential returns per unit of risk. JD Inc is currently generating about 0.0 per unit of risk. If you would invest  10,378  in Alibaba Group Holdings on April 24, 2025 and sell it today you would lose (118.00) from holding Alibaba Group Holdings or give up 1.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Alibaba Group Holdings  vs.  JD Inc

Alibaba Group Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alibaba Group Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, Alibaba Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

JD Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days JD Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, JD is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Alibaba Group and JD

The main advantage of trading using opposite Alibaba Group and JD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alibaba Group position performs unexpectedly, JD 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 JD will offset losses from the drop in JD's long position.

The idea behind Alibaba Group Holdings and JD Inc 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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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 the Technical Analysis module to check basic technical indicators and analysis based on most latest market data.