Correlation Between Vipshop Holdings and CarMax

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

Diversification Opportunities for Vipshop Holdings and CarMax

-0.53

Correlation Coefficient

Vipshop Holdings  CarMax

Excellent diversification

The 3 months correlation between Vipshop and CarMax is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Vipshop Holdings Limited and CarMax Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarMax 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 CarMax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarMax Inc has no effect on the direction of Vipshop Holdings i.e., Vipshop Holdings and CarMax go up and down completely randomly.

Pair Corralation between Vipshop Holdings and CarMax

Given the investment horizon of 90 days Vipshop Holdings Limited is expected to generate 1.93 times more return on investment than CarMax. However, Vipshop Holdings is 1.93 times more volatile than CarMax Inc. It trades about 0.05 of its potential returns per unit of risk. CarMax Inc is currently generating about 0.1 per unit of risk. If you would invest  1,324  in Vipshop Holdings Limited on September 23, 2024 and sell it today you would earn a total of  34.00  from holding Vipshop Holdings Limited or generate 2.57% return on investment over 90 days.

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

Vipshop Holdings Limited  vs.  CarMax Inc

Vipshop Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vipshop Holdings Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Vipshop Holdings is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

CarMax Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CarMax Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating primary indicators, CarMax may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Vipshop Holdings and CarMax

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

The idea behind Vipshop Holdings Limited and CarMax 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 Stocks Directory module to find actively traded stocks across global markets.