Correlation Between Baozun and Delivery Hero

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

By analyzing existing cross correlation between Baozun Inc and Delivery Hero SE, you can compare the effects of market volatilities on Baozun and Delivery Hero 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 Baozun with a short position of Delivery Hero. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baozun and Delivery Hero.

Diversification Opportunities for Baozun and Delivery Hero

0.7

Correlation Coefficient

Baozun  Delivery Hero

Poor diversification

The 3 months correlation between Baozun and Delivery is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Baozun Inc and Delivery Hero SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delivery Hero SE and Baozun 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 Baozun Inc are associated (or correlated) with Delivery Hero. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delivery Hero SE has no effect on the direction of Baozun i.e., Baozun and Delivery Hero go up and down completely randomly.

Pair Corralation between Baozun and Delivery Hero

Given the investment horizon of 90 days Baozun is expected to generate 1.06 times less return on investment than Delivery Hero. In addition to that, Baozun is 1.76 times more volatile than Delivery Hero SE. It trades about 0.08 of its total potential returns per unit of risk. Delivery Hero SE is currently generating about 0.15 per unit of volatility. If you would invest  308.00  in Delivery Hero SE on August 31, 2024 and sell it today you would earn a total of  85.00  from holding Delivery Hero SE or generate 27.6% return on investment over 90 days.

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

Baozun Inc  vs.  Delivery Hero SE

Baozun Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Baozun Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Baozun displayed solid returns over the last few months and may actually be approaching a breakup point.

Delivery Hero SE

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Delivery Hero SE are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal technical indicators, Delivery Hero showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Baozun and Delivery Hero

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

The idea behind Baozun Inc and Delivery Hero SE 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.