Correlation Between Target and Vipshop Holdings

Can any of the company-specific risk be diversified away by investing in both Target 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 Target and Vipshop Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Target and Vipshop Holdings Limited, you can compare the effects of market volatilities on Target 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 Target with a short position of Vipshop Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Target and Vipshop Holdings.

Diversification Opportunities for Target and Vipshop Holdings

0.39

Correlation Coefficient

Target  Vipshop Holdings

Weak diversification

The 3 months correlation between Target and Vipshop is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Target and Vipshop Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vipshop Holdings and Target 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 Target 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 Target i.e., Target and Vipshop Holdings go up and down completely randomly.

Pair Corralation between Target and Vipshop Holdings

Considering the 90-day investment horizon Target is expected to under-perform the Vipshop Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Target is 1.32 times less risky than Vipshop Holdings. The stock trades about -0.01 of its potential returns per unit of risk. The Vipshop Holdings Limited is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  680.00  in Vipshop Holdings Limited on January 27, 2024 and sell it today you would earn a total of  894.00  from holding Vipshop Holdings Limited or generate 131.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Target  vs.  Vipshop Holdings Limited

Target

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Target are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, Target unveiled solid returns over the last few months and may actually be approaching a breakup point.

Vipshop Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vipshop Holdings Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Target and Vipshop Holdings

The main advantage of trading using opposite Target and Vipshop Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Target 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 Target 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.

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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.