Correlation Between Vipshop Holdings and Farfetch

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

Diversification Opportunities for Vipshop Holdings and Farfetch

0.0

Correlation Coefficient

Vipshop Holdings  Farfetch

Pay attention - limited upside

The 3 months correlation between Vipshop and Farfetch is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Vipshop Holdings Limited and Farfetch Ltd Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farfetch Class 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 Farfetch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farfetch Class has no effect on the direction of Vipshop Holdings i.e., Vipshop Holdings and Farfetch go up and down completely randomly.

Pair Corralation between Vipshop Holdings and Farfetch

If you would invest  1,328  in Vipshop Holdings Limited on December 30, 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	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Vipshop Holdings Limited  vs.  Farfetch Ltd Class

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 9 (%) 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.

Farfetch Class

Risk-Adjusted Performance

Very Weak

Over the last 90 days Farfetch Ltd Class has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Farfetch is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Vipshop Holdings and Farfetch

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

The idea behind Vipshop Holdings Limited and Farfetch Ltd Class 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.

Check out your portfolio center.

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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.