Correlation Between Vipshop Holdings and International Business
Can any of the company-specific risk be diversified away by investing in both Vipshop Holdings and International Business 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 Vipshop Holdings and International Business into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vipshop Holdings Limited and International Business Machines, you can compare the effects of market volatilities on Vipshop Holdings and International Business 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 Vipshop Holdings with a short position of International Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vipshop Holdings and International Business.
Diversification Opportunities for Vipshop Holdings and International Business
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vipshop and International is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Vipshop Holdings Limited and International Business Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Business and Vipshop Holdings 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 Vipshop Holdings Limited are associated (or correlated) with International Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Business has no effect on the direction of Vipshop Holdings i.e., Vipshop Holdings and International Business go up and down completely randomly.
Pair Corralation between Vipshop Holdings and International Business
Given the investment horizon of 90 days Vipshop Holdings Limited is expected to under-perform the International Business. In addition to that, Vipshop Holdings is 2.5 times more volatile than International Business Machines. It trades about -0.09 of its total potential returns per unit of risk. International Business Machines is currently generating about -0.15 per unit of volatility. If you would invest 18,879 in International Business Machines on January 25, 2024 and sell it today you would lose (548.00) from holding International Business Machines or give up 2.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vipshop Holdings Limited vs. International Business Machine
Performance |
| Timeline |
| Vipshop Holdings |
| International Business |
Vipshop Holdings and International Business Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vipshop Holdings and International Business
The main advantage of trading using opposite Vipshop Holdings and International Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vipshop Holdings position performs unexpectedly, International Business 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 International Business will offset losses from the drop in International Business' long position.| Vipshop Holdings vs. Pinduoduo | Vipshop Holdings vs. Sea | Vipshop Holdings vs. MercadoLibre | Vipshop Holdings vs. Alibaba Group Holding |
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 the ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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