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encoderer
on Jan 28, 2015
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Yahoo to Spin Off Its Stake in Alibaba
Or simply that $40bn in volatile stock that can't be sold for a year is not worth full face value. Which makes a lot of sense if you think about it.
ucha
on Jan 28, 2015
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You could hedge that risk by shorting the BABA stock at the same time you own YHOO. That way, you have no exposure to BABA.
encoderer
on Jan 28, 2015
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Even if you're careful to short the same notional value, that's not a pairs trade that I would put on. It would open me to upside risk in BABA if YHOO does not perform as well. Correlations change all the time.
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