Correlation Between Alibaba Group and Jumia Technologies

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

By analyzing existing cross correlation between Alibaba Group Holding and Jumia Technologies AG, you can compare the effects of market volatilities on Alibaba Group and Jumia Technologies 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 Jumia Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alibaba Group and Jumia Technologies.

Diversification Opportunities for Alibaba Group and Jumia Technologies

0.44

Correlation Coefficient

Alibaba Group  Jumia Technologies

Very weak diversification

The 3 months correlation between Alibaba and Jumia is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and Jumia Technologies AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jumia Technologies 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 Holding are associated (or correlated) with Jumia Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jumia Technologies has no effect on the direction of Alibaba Group i.e., Alibaba Group and Jumia Technologies go up and down completely randomly.

Pair Corralation between Alibaba Group and Jumia Technologies

Given the investment horizon of 90 days Alibaba Group is expected to generate 1.24 times less return on investment than Jumia Technologies. But when comparing it to its historical volatility, Alibaba Group Holding is 2.22 times less risky than Jumia Technologies. It trades about 0.07 of its potential returns per unit of risk. Jumia Technologies AG is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  690.00  in Jumia Technologies AG on March 7, 2024 and sell it today you would earn a total of  38.97  from holding Jumia Technologies AG or generate 5.65% return on investment over 90 days.

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

Alibaba Group Holding  vs.  Jumia Technologies AG

Alibaba Group Holding

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alibaba Group Holding are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental drivers, Alibaba Group may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Jumia Technologies

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Jumia Technologies AG are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent forward indicators, Jumia Technologies sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alibaba Group and Jumia Technologies

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

The idea behind Alibaba Group Holding and Jumia Technologies AG 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.