Adriana Broz

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Finance

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Nov 24, 2024

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1. Introduction An investor's risk tolerance and investment goals should inform their asset allocation strategy. This strategy is useful for both personal investment portfolios and institutional investment pools. Portfolio managers aid their clients in achieving their financial objectives in two key ways: by increasing returns and decreasing risk. Liquidity, security, and revenue are prioritized by a financially sound institution while managing its assets. All three objectives cannot be met simultaneously. One must be prepared to make concessions in order to achieve monetary success. The present portfolio theory is based on the work that earned Nobel laureate Harry Markowitz the prize in 1952. An investor can get the return on investment (ROI) they want while keeping their exposure to risk within acceptable limits, proponents of this theory say. Therefore, those who are willing to take on more risk should be monetarily rewarded for doing so, as proposed by the Modern Portfolio Theory. The MPT is built on the premise that it is advantageous to disperse one's investment capital among a wide variety of asset classess (Huang, 2021). Diversification Owning assets that are not perfectly positively correlated with one another is one way to diversify a portfolio and reduce its exposure to idiosyncratic risk. A helpful statistic for measuring the degree of proximity between two variables is the correlation coefficient, which can take on values from -1 to 1.When both asset correlation coefficients are -1, there is no correlation between the assets. It seems to reason that if one is enhanced, the other will be as well. The coefficient will be 1 if the link is established. Since these assets are equally subject to the influence of the market, their rates of change are also uniform. Positive correlations in a portfolio are caused by an increase in the standard deviation or risk of the portfolio. In order to lessen the impact of idiosyncratic risk, it is common practice to have a diversified portfolio of assets that are not perfectly positively correlated with one another. For the

sake of this example, let's pretend A and B are actual portfolio assets. With a r=-0.9, it's clear that A and B don't have much in common with one another. From the graph, it is easy to see that as A drops, B rises to make up for it. Here is where having a diversified portfolio might come in handy (Li, Y., & Chen, M, 2022). 2. Alibaba In China, if not the entire world, Alibaba is the most successful online marketplace. Millions of businesses call Taobao, Tmall, and Alibaba.com home, and hundreds of millions of people visit the company's three main sites every month. Alibaba, the world’s largest online marketplace, processes more daily business than any other online marketplace combined. Alibaba Group Holding Ltd is a corporation that helps keep the e-commerce industry and related technology running smoothly. Customers have access to the fundamental building blocks for effective online commerce. Before assembling a portfolio, you should evaluate your risk tolerance, your long- term financial goals, and the current market environment. It's preferable to have options while making investment decisions. The capacity to balance benefits and drawbacks is crucial in today's competitive business world (Alibaba Group, 2023). Investment opportunity.

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Keeping your finances in order will be a breeze with the help of Alibaba's user-friendly solutions. Because its business model is extensible, it can go beyond virtual marketplaces. I've opted to utilize Alibaba as my portfolio management platform since its adaptable business strategy appeals to customers in many different fields. with this reason alone, I opted with Alibaba. By diversifying your holdings, you can reduce the impact of a drop in any single market. The potential for Alibaba to grow is huge, especially in emerging markets and other underdeveloped areas. As a result of its consistent excellent quality and market dominance, Alibaba has established the de facto benchmark in a number of different industries. With our existing market share, we are confident in our company's future. Alibaba's unique culture and unyielding dedication to its consumers are major contributors to the company's spectacular global success. A firm that wants to be noticed must invest heavily in creating its own distinct brand identity (Ma, J., & Zhang, L, 2019). Alibaba is an attractive investment due to its strong financial performance, large asset base, development potential, industry leadership, and well-known brand name. Alibaba and similar e- commerce platforms are useful since they streamline the process of opening an online shop. Alibaba stock could be a fantastic option for those looking to diversify their portfolio and acquire exposure to rapidly expanding industries like e-commerce and technology. Portfolio model  Markowitz's portfolio theory (MPT) is a popular concept for managing investment portfolios with the goal of maximizing return while minimizing risk. To give its full meaning, "Modern Portfolio Theory" is what "MPT" is an abbreviation for. This idea was the basis for a technique developed by famous investor Harry Markowitz in 1952. The Markowitz model was developed as a result of this insight.  Loss allocation plays a crucial role in Markowitz's portfolio theory. According to the notion, diversified investment portfolios perform better than those that specialize in a single asset class. The importance of asset diversification is known to every savvy investor. Spreading your investments around makes you less vulnerable to the loss of any single position. Markowitz's portfolio theory is used by many investors as a hedge against

the market's ups and downs. The method increases profits while decreasing expenditures, making it a no-brainer for any business owner to implement.  Alibaba-specific data, such as ROI, can be extrapolated from the company's growth projections and past performance.  The media's attention was riveted on Alibaba because of its meteoric rise and bright future. However, the long-term health of the corporation is threatened by things like market volatility, fierce competition, and limiting government rules. Because of its huge user base, Alibaba is able to quickly respond to market changes.  Covariance is a statistical measure of the degree of correlation between two assets. The portfolio's other holdings can be used to determine Alibaba's worth. We would conduct our research by analyzing both current and past market patterns. According to the Markowitz portfolio theory, investors can maximize returns while minimizing risk by selecting assets that are uncorrelated with one another and striking a balance between the anticipated benefits and risks of each asset. Funding Task Funding Reasons Delivery Medium Does an Essential Function for Electronic Markets Exist? The speed with which orders are fulfilled may be a contributing factor to Alibaba's meteoric rise in popularity. These enhancements help Alibaba save money, handle orders more quickly, and deliver better customer service. Acquisitions Low While Alibaba recognizes the growth-inducing potential of smart acquisitions, it has opted to focus on developing its own internal resources instead. Alibaba may not be as eager to form large collaborations as it once was ( Alibaba Group, 2020) . Marketing High The widest possible audience can learn about Alibaba's wares thanks to the company's extensive advertising and other means of promotion. Don't forget that cash allocation is dynamic and can shift with the times and Alibaba's goals.

Culture  The level of cultural influence of a country on its citizens and businesses has a significant impact on the level of success various forms of entrepreneurship have on the Alibaba platform. Despite largely business-friendly governmental policies, Alibaba may struggle due to cultural reasons like these.  Greater success for Alibaba is possible in jurisdictions where startups are given greater leeway and risk-taking is encouraged. However, societies that are stable and predictable have a better chance of success if they take measures to mitigate the risks they confront.  Social and economic policies that protect business owners in the case of a failure would be beneficial to both the general public and Alibaba. Communities where failure is seen as an opportunity for growth rather than a cause for despair are more likely to embrace policies that promote risk-taking and education (Alibaba Group, 2020).  For Alibaba to be successful in countries that place a premium on entrepreneurship, they need to enact policies that promote and reward the creation of new firms. Socially responsible businesses, such as community development and social entrepreneurship, thrive in societies where people are treated with respect and kindness.  In countries with less regulations for starting and running enterprises, Alibaba may thrive. Free market policies that encourage innovation and competition flourish in economies with minimal regulations and constraints. Conclusion Therefore, a country's cultural norms significantly affect Alibaba's commercial success there. In order to create laws that encourage and support entrepreneurs, political and business leaders need to have a strong understanding of the values and beliefs held by the general public. A well- informed public is essential for efficient policymaking. Understanding and respecting local cultural norms and values are crucial to Alibaba's success in the region. By adopting these practices, the company will increase its chances of breaking into the regional market while still adhering to the laws and norms of the area. When expanding into new international areas, online

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retail giants like Alibaba have a long way to go before they fully cater to local tastes and customs.

Reference Ma, J., & Zhang, L. (2019). Alibaba Group: A Case Study on E-commerce in China. Harvard Business Review, 97(5), 78-87. Huang, X., & Wang, C. (2021). Alibaba: The House That Jack Ma Built . Harvard Business Press. Li, Y., & Chen, M. (2022). Strategic Analysis of Alibaba's International Expansion. In Proceedings of the International Conference on E-commerce (pp. 234-246). Harvard University Press. Alibaba Group. (2020). Annual Report 2020. Alibaba Group. (n.d.). About Us. Retrieved June 15, 2023, from https://www.alibabagroup.com/en/about/overview