Correlation Between Liquidity Services and Baozun

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

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

Diversification Opportunities for Liquidity Services and Baozun

0.13

Correlation Coefficient

Liquidity Services  Baozun

Average diversification

The 3 months correlation between Liquidity and Baozun is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Liquidity Services and Baozun Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baozun Inc and Liquidity Services 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 Liquidity Services are associated (or correlated) with Baozun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baozun Inc has no effect on the direction of Liquidity Services i.e., Liquidity Services and Baozun go up and down completely randomly.

Pair Corralation between Liquidity Services and Baozun

Given the investment horizon of 90 days Liquidity Services is expected to under-perform the Baozun. But the stock apears to be less risky and, when comparing its historical volatility, Liquidity Services is 1.61 times less risky than Baozun. The stock trades about -0.01 of its potential returns per unit of risk. The Baozun Inc is currently generating about 0.03 of returns per unit of risk over similar time horizon. 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 Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Liquidity Services  vs.  Baozun Inc

Liquidity Services

Risk-Adjusted Performance

Very Weak

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

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.

Pair Trading with Liquidity Services and Baozun

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

The idea behind Liquidity Services and Baozun Inc 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.