Correlation Between Baozun Inc and Alibaba Group

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Can any of the company-specific risk be diversified away by investing in both Baozun Inc and Alibaba Group 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 Baozun Inc and Alibaba Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Baozun Inc ADR and Alibaba Group Holding, you can compare the effects of market volatilities on Baozun Inc and Alibaba Group 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 Baozun Inc with a short position of Alibaba Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baozun Inc and Alibaba Group.

Diversification Opportunities for Baozun Inc and Alibaba Group

0.91
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Baozun and Alibaba is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Baozun Inc ADR and Alibaba Group Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alibaba Group Holding and Baozun Inc 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 Baozun Inc ADR are associated (or correlated) with Alibaba Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alibaba Group Holding has no effect on the direction of Baozun Inc i.e., Baozun Inc and Alibaba Group go up and down completely randomly.

Pair Corralation between Baozun Inc and Alibaba Group

Given the investment horizon of 90 days Baozun Inc ADR is expected to generate 1.08 times more return on investment than Alibaba Group. However, Baozun Inc is 1.08 times more volatile than Alibaba Group Holding. It trades about -0.03 of its potential returns per unit of risk. Alibaba Group Holding is currently generating about -0.05 per unit of risk. If you would invest  993.00  in Baozun Inc ADR on May 15, 2022 and sell it today you would lose (80.00)  from holding Baozun Inc ADR or give up 8.06% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Baozun Inc ADR  vs.  Alibaba Group Holding

 Performance (%) 
       Timeline  
Baozun Inc ADR 
Baozun Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Baozun Inc ADR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, Baozun Inc disclosed solid returns over the last few months and may actually be approaching a breakup point.

Baozun Price Channel

Alibaba Group Holding 
Alibaba Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Alibaba Group Holding are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting fundamental drivers, Alibaba Group sustained solid returns over the last few months and may actually be approaching a breakup point.

Alibaba Price Channel

Baozun Inc and Alibaba Group Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Baozun Inc and Alibaba Group

The main advantage of trading using opposite Baozun Inc and Alibaba Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baozun Inc position performs unexpectedly, Alibaba Group 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 Alibaba Group will offset losses from the drop in Alibaba Group's long position.
The idea behind Baozun Inc ADR and Alibaba Group Holding 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.
Check out your portfolio center. 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.

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