Correlation Between PDD Holdings and Vipshop Holdings

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

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

Diversification Opportunities for PDD Holdings and Vipshop Holdings

0.97

Correlation Coefficient

PDD Holdings  Vipshop Holdings

Almost no diversification

The 3 months correlation between PDD and Vipshop is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding PDD Holdings and Vipshop Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vipshop Holdings and PDD 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 PDD Holdings are associated (or correlated) with Vipshop Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vipshop Holdings has no effect on the direction of PDD Holdings i.e., PDD Holdings and Vipshop Holdings go up and down completely randomly.

Pair Corralation between PDD Holdings and Vipshop Holdings

Considering the 90-day investment horizon PDD Holdings is expected to generate 1.47 times less return on investment than Vipshop Holdings. In addition to that, PDD Holdings is 1.31 times more volatile than Vipshop Holdings Limited. It trades about 0.03 of its total potential returns per unit of risk. Vipshop Holdings Limited is currently generating about 0.06 per unit of volatility. If you would invest  1,254  in Vipshop Holdings Limited on August 30, 2024 and sell it today you would earn a total of  103.00  from holding Vipshop Holdings Limited or generate 8.21% return on investment over 90 days.

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

PDD Holdings  vs.  Vipshop Holdings Limited

PDD Holdings

Risk-Adjusted Performance

2 of 100

Insignificant

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

Vipshop Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vipshop Holdings Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Vipshop Holdings may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with PDD Holdings and Vipshop Holdings

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

The idea behind PDD Holdings and Vipshop Holdings Limited 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.