Correlation Between Vipshop Holdings and Jumia Technologies

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

Diversification Opportunities for Vipshop Holdings and Jumia Technologies

0.62

Correlation Coefficient

Vipshop Holdings  Jumia Technologies

Poor diversification

The 3 months correlation between Vipshop and Jumia is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Vipshop Holdings Limited and Jumia Technologies AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jumia Technologies 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 Jumia Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jumia Technologies has no effect on the direction of Vipshop Holdings i.e., Vipshop Holdings and Jumia Technologies go up and down completely randomly.

Pair Corralation between Vipshop Holdings and Jumia Technologies

Given the investment horizon of 90 days Vipshop Holdings Limited is expected to generate 0.64 times more return on investment than Jumia Technologies. However, Vipshop Holdings Limited is 1.56 times less risky than Jumia Technologies. It trades about 0.06 of its potential returns per unit of risk. Jumia Technologies AG is currently generating about -0.05 per unit of risk. If you would invest  1,254  in Vipshop Holdings Limited on August 30, 2024 and sell it today you would earn a total of  103.00  from holding Vipshop Holdings Limited or generate 8.21% return on investment over 90 days.

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

Vipshop Holdings Limited  vs.  Jumia Technologies AG

Vipshop Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vipshop Holdings Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Vipshop Holdings may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Jumia Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jumia Technologies AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's forward indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Vipshop Holdings and Jumia Technologies

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

The idea behind Vipshop Holdings Limited and Jumia Technologies AG 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.