Correlation Between Secoo Holding and Emerge Commerce

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

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

Diversification Opportunities for Secoo Holding and Emerge Commerce

0.04

Correlation Coefficient

Secoo Holding  Emerge Commerce

Significant diversification

The 3 months correlation between Secoo and Emerge is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Secoo Holding and Emerge Commerce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerge Commerce and Secoo Holding 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 Secoo Holding are associated (or correlated) with Emerge Commerce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerge Commerce has no effect on the direction of Secoo Holding i.e., Secoo Holding and Emerge Commerce go up and down completely randomly.

Pair Corralation between Secoo Holding and Emerge Commerce

If you would invest  2.50  in Emerge Commerce on August 31, 2024 and sell it today you would earn a total of  0.01  from holding Emerge Commerce or generate 0.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	1.59%
Values	Daily Returns

Secoo Holding  vs.  Emerge Commerce

Secoo Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Secoo Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Secoo Holding is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Emerge Commerce

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Emerge Commerce are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent primary indicators, Emerge Commerce reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Secoo Holding and Emerge Commerce

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

The idea behind Secoo Holding and Emerge Commerce 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.