Correlation Between Vipshop Holdings and Etsy

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

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

Diversification Opportunities for Vipshop Holdings and Etsy

-0.64

Correlation Coefficient

Vipshop Holdings  Etsy

Excellent diversification

The 3 months correlation between Vipshop and Etsy is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Vipshop Holdings Limited and Etsy Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Etsy Inc and Vipshop 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 Vipshop Holdings Limited are associated (or correlated) with Etsy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Etsy Inc has no effect on the direction of Vipshop Holdings i.e., Vipshop Holdings and Etsy go up and down completely randomly.

Pair Corralation between Vipshop Holdings and Etsy

Assuming the 90 days trading horizon Vipshop Holdings Limited is expected to generate 1.66 times more return on investment than Etsy. However, Vipshop Holdings is 1.66 times more volatile than Etsy Inc. It trades about 0.12 of its potential returns per unit of risk. Etsy Inc is currently generating about -0.01 per unit of risk. If you would invest  3,460  in Vipshop Holdings Limited on September 5, 2024 and sell it today you would earn a total of  731.00  from holding Vipshop Holdings Limited or generate 21.13% return on investment over 90 days.

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

Vipshop Holdings Limited  vs.  Etsy Inc

Vipshop Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vipshop Holdings Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, Vipshop Holdings sustained solid returns over the last few months and may actually be approaching a breakup point.

Etsy Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Etsy Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Etsy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vipshop Holdings and Etsy

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

The idea behind Vipshop Holdings Limited and Etsy 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.