Correlation Between Vipshop Holdings and JD

Can any of the company-specific risk be diversified away by investing in both Vipshop Holdings and JD 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 JD 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 JD Inc, you can compare the effects of market volatilities on Vipshop Holdings and JD 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 JD. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vipshop Holdings and JD.

Diversification Opportunities for Vipshop Holdings and JD

0.5

Correlation Coefficient

Vipshop Holdings  JD

Very weak diversification

The 3 months correlation between Vipshop and JD is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Vipshop Holdings Limited and JD Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JD 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 JD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JD Inc has no effect on the direction of Vipshop Holdings i.e., Vipshop Holdings and JD go up and down completely randomly.

Pair Corralation between Vipshop Holdings and JD

Assuming the 90 days trading horizon Vipshop Holdings is expected to generate 1.21 times less return on investment than JD. In addition to that, Vipshop Holdings is 1.1 times more volatile than JD Inc. It trades about 0.07 of its total potential returns per unit of risk. JD Inc is currently generating about 0.09 per unit of volatility. If you would invest  3,533  in JD Inc on December 28, 2024 and sell it today you would earn a total of  587.00  from holding JD Inc or generate 16.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Vipshop Holdings Limited  vs.  JD Inc

Vipshop Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vipshop Holdings Limited are ranked lower than 5 (%) 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.

JD Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JD Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, JD sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vipshop Holdings and JD

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

The idea behind Vipshop Holdings Limited and JD 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.