Correlation Between Alibaba Group and BSA

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

Diversification Opportunities for Alibaba Group and BSA

0.34

Correlation Coefficient

Alibaba Group  BSA

Weak diversification

The 3 months correlation between Alibaba and BSA is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and BSA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BSA 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 BSA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BSA has no effect on the direction of Alibaba Group i.e., Alibaba Group and BSA go up and down completely randomly.

Pair Corralation between Alibaba Group and BSA

Given the investment horizon of 90 days Alibaba Group is expected to generate 1.97 times less return on investment than BSA. But when comparing it to its historical volatility, Alibaba Group Holding is 1.04 times less risky than BSA. It trades about 0.04 of its potential returns per unit of risk. BSA is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  98.00  in BSA on October 20, 2024 and sell it today you would earn a total of  2.00  from holding BSA or generate 2.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

Alibaba Group Holding  vs.  BSA

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.

BSA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BSA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Alibaba Group and BSA

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

The idea behind Alibaba Group Holding and BSA 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.