Correlation Between Ford and Vipshop Holdings

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

Diversification Opportunities for Ford and Vipshop Holdings

0.65
  Correlation Coefficient

Poor diversification

The 3 months correlation between Ford and Vipshop is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Vipshop Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vipshop Holdings and Ford 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 Ford Motor are associated (or correlated) with Vipshop Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vipshop Holdings has no effect on the direction of Ford i.e., Ford and Vipshop Holdings go up and down completely randomly.

Pair Corralation between Ford and Vipshop Holdings

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.54 times more return on investment than Vipshop Holdings. However, Ford Motor is 1.85 times less risky than Vipshop Holdings. It trades about 0.2 of its potential returns per unit of risk. Vipshop Holdings Limited is currently generating about -0.01 per unit of risk. If you would invest  1,200  in Ford Motor on December 29, 2023 and sell it today you would earn a total of  106.00  from holding Ford Motor or generate 8.83% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Ford Motor  vs.  Vipshop Holdings Limited

 Performance 
       Timeline  
Ford Motor 

Risk-Adjusted Performance

6 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Ford may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Vipshop Holdings 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Vipshop Holdings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Vipshop Holdings is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Ford and Vipshop Holdings Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ford and Vipshop Holdings

The main advantage of trading using opposite Ford and Vipshop Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Vipshop Holdings 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 Vipshop Holdings will offset losses from the drop in Vipshop Holdings' long position.
The idea behind Ford Motor and Vipshop Holdings Limited 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 the Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

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