Correlation Between Baozun and CarPartsCom

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

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

Diversification Opportunities for Baozun and CarPartsCom

-0.25

Correlation Coefficient

Baozun  CarPartsCom

Very good diversification

The 3 months correlation between Baozun and CarPartsCom is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Baozun Inc and CarPartsCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarPartsCom 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 CarPartsCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarPartsCom has no effect on the direction of Baozun i.e., Baozun and CarPartsCom go up and down completely randomly.

Pair Corralation between Baozun and CarPartsCom

Given the investment horizon of 90 days Baozun Inc is expected to generate 0.56 times more return on investment than CarPartsCom. However, Baozun Inc is 1.78 times less risky than CarPartsCom. It trades about 0.03 of its potential returns per unit of risk. CarPartsCom is currently generating about 0.01 per unit of risk. If you would invest  276.00  in Baozun Inc on December 30, 2024 and sell it today you would earn a total of  4.00  from holding Baozun Inc or generate 1.45% 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.  CarPartsCom

Baozun Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Baozun Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Baozun may actually be approaching a critical reversion point that can send shares even higher in April 2025.

CarPartsCom

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Baozun and CarPartsCom

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

The idea behind Baozun Inc and CarPartsCom 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.