Correlation Between Vipshop Holdings and Sprouts Farmers

Can any of the company-specific risk be diversified away by investing in both Vipshop Holdings and Sprouts Farmers 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 Sprouts Farmers 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 Sprouts Farmers Market, you can compare the effects of market volatilities on Vipshop Holdings and Sprouts Farmers 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 Sprouts Farmers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vipshop Holdings and Sprouts Farmers.

Diversification Opportunities for Vipshop Holdings and Sprouts Farmers

0.62

Correlation Coefficient

Vipshop Holdings  Sprouts Farmers

Poor diversification

The 3 months correlation between Vipshop and Sprouts is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Vipshop Holdings Limited and Sprouts Farmers Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprouts Farmers Market 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 Sprouts Farmers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprouts Farmers Market has no effect on the direction of Vipshop Holdings i.e., Vipshop Holdings and Sprouts Farmers go up and down completely randomly.

Pair Corralation between Vipshop Holdings and Sprouts Farmers

Given the investment horizon of 90 days Vipshop Holdings Limited is expected to under-perform the Sprouts Farmers. In addition to that, Vipshop Holdings is 2.21 times more volatile than Sprouts Farmers Market. It trades about -0.29 of its total potential returns per unit of risk. Sprouts Farmers Market is currently generating about 0.06 per unit of volatility. If you would invest  6,229  in Sprouts Farmers Market on January 20, 2024 and sell it today you would earn a total of  81.00  from holding Sprouts Farmers Market or generate 1.3% return on investment over 90 days.

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

Vipshop Holdings Limited  vs.  Sprouts Farmers Market

Vipshop Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vipshop Holdings Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Vipshop Holdings may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Sprouts Farmers Market

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sprouts Farmers Market are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent technical and fundamental indicators, Sprouts Farmers displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vipshop Holdings and Sprouts Farmers

The main advantage of trading using opposite Vipshop Holdings and Sprouts Farmers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vipshop Holdings position performs unexpectedly, Sprouts Farmers 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 Sprouts Farmers will offset losses from the drop in Sprouts Farmers' long position.

The idea behind Vipshop Holdings Limited and Sprouts Farmers Market 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.