Correlation Between Vipshop Holdings and Pinduoduo

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

Diversification Opportunities for Vipshop Holdings and Pinduoduo

0.45

Correlation Coefficient

Vipshop Holdings  Pinduoduo

Very weak diversification

The 3 months correlation between Vipshop and Pinduoduo is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Vipshop Holdings Limited and Pinduoduo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pinduoduo 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 Pinduoduo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pinduoduo has no effect on the direction of Vipshop Holdings i.e., Vipshop Holdings and Pinduoduo go up and down completely randomly.

Pair Corralation between Vipshop Holdings and Pinduoduo

Assuming the 90 days trading horizon Vipshop Holdings Limited is expected to generate 0.7 times more return on investment than Pinduoduo. However, Vipshop Holdings Limited is 1.44 times less risky than Pinduoduo. It trades about -0.04 of its potential returns per unit of risk. Pinduoduo is currently generating about -0.05 per unit of risk. If you would invest  4,196  in Vipshop Holdings Limited on October 26, 2024 and sell it today you would lose (286.00) from holding Vipshop Holdings Limited or give up 6.82% of portfolio value over 90 days.

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

Vipshop Holdings Limited  vs.  Pinduoduo

Vipshop Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pinduoduo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pinduoduo has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Vipshop Holdings and Pinduoduo

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

The idea behind Vipshop Holdings Limited and Pinduoduo 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.