Correlation Between Alibaba Group and Bioelectronics Corp

Can any of the company-specific risk be diversified away by investing in both Alibaba Group and Bioelectronics Corp 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 Bioelectronics Corp 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 Bioelectronics Corp, you can compare the effects of market volatilities on Alibaba Group and Bioelectronics Corp 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 Bioelectronics Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alibaba Group and Bioelectronics Corp.

Diversification Opportunities for Alibaba Group and Bioelectronics Corp

0.03

Correlation Coefficient

Alibaba Group  Bioelectronics Corp

Significant diversification

The 3 months correlation between Alibaba and Bioelectronics is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and Bioelectronics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bioelectronics Corp 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 Bioelectronics Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bioelectronics Corp has no effect on the direction of Alibaba Group i.e., Alibaba Group and Bioelectronics Corp go up and down completely randomly.

Pair Corralation between Alibaba Group and Bioelectronics Corp

Given the investment horizon of 90 days Alibaba Group Holding is expected to under-perform the Bioelectronics Corp. But the stock apears to be less risky and, when comparing its historical volatility, Alibaba Group Holding is 10.4 times less risky than Bioelectronics Corp. The stock trades about -0.22 of its potential returns per unit of risk. The Bioelectronics Corp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  0.03  in Bioelectronics Corp on October 5, 2024 and sell it today you would earn a total of  0.00  from holding Bioelectronics Corp or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Alibaba Group Holding  vs.  Bioelectronics Corp

Alibaba Group Holding

Risk-Adjusted Performance

0 of 100

Very Weak

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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Bioelectronics Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bioelectronics Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating technical and fundamental indicators, Bioelectronics Corp disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alibaba Group and Bioelectronics Corp

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

The idea behind Alibaba Group Holding and Bioelectronics Corp 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.