Correlation Between Baozun and Solo Brands

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

By analyzing existing cross correlation between Baozun Inc and Solo Brands, you can compare the effects of market volatilities on Baozun and Solo Brands 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 Solo Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baozun and Solo Brands.

Diversification Opportunities for Baozun and Solo Brands

-0.06

Correlation Coefficient

Baozun  Solo Brands

Good diversification

The 3 months correlation between Baozun and Solo is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Baozun Inc and Solo Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solo Brands 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 Solo Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solo Brands has no effect on the direction of Baozun i.e., Baozun and Solo Brands go up and down completely randomly.

Pair Corralation between Baozun and Solo Brands

Given the investment horizon of 90 days Baozun Inc is expected to generate 1.16 times more return on investment than Solo Brands. However, Baozun is 1.16 times more volatile than Solo Brands. It trades about 0.08 of its potential returns per unit of risk. Solo Brands is currently generating about -0.01 per unit of risk. If you would invest  225.00  in Baozun Inc on August 31, 2024 and sell it today you would earn a total of  45.00  from holding Baozun Inc or generate 20.0% return on investment over 90 days.

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

Baozun Inc  vs.  Solo Brands

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.

Solo Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solo Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Solo Brands is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Baozun and Solo Brands

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

The idea behind Baozun Inc and Solo Brands 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.