Correlation Between Vipshop Holdings and Baozun

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

Diversification Opportunities for Vipshop Holdings and Baozun

0.48

Correlation Coefficient

Vipshop Holdings  Baozun

Very weak diversification

The 3 months correlation between Vipshop and Baozun is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Vipshop Holdings Limited and Baozun Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baozun 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 Baozun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baozun Inc has no effect on the direction of Vipshop Holdings i.e., Vipshop Holdings and Baozun go up and down completely randomly.

Pair Corralation between Vipshop Holdings and Baozun

Given the investment horizon of 90 days Vipshop Holdings Limited is expected to generate 0.68 times more return on investment than Baozun. However, Vipshop Holdings Limited is 1.48 times less risky than Baozun. It trades about 0.13 of its potential returns per unit of risk. Baozun Inc is currently generating about 0.03 per unit of risk. If you would invest  1,328  in Vipshop Holdings Limited on December 29, 2024 and sell it today you would earn a total of  285.00  from holding Vipshop Holdings Limited or generate 21.46% return on investment over 90 days.

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

Vipshop Holdings Limited  vs.  Baozun Inc

Vipshop Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vipshop Holdings Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Vipshop Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Baozun Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Baozun Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Baozun may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Vipshop Holdings and Baozun

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

The idea behind Vipshop Holdings Limited and Baozun 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.