Correlation Between VTEX and Shopify

Can any of the company-specific risk be diversified away by investing in both VTEX and Shopify 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 VTEX and Shopify into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between VTEX and Shopify, you can compare the effects of market volatilities on VTEX and Shopify 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 VTEX with a short position of Shopify. Check out your portfolio center. Please also check ongoing floating volatility patterns of VTEX and Shopify.

Diversification Opportunities for VTEX and Shopify

0.73

Correlation Coefficient

VTEX  Shopify

Poor diversification

The 3 months correlation between VTEX and Shopify is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding VTEX and Shopify in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shopify and VTEX 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 VTEX are associated (or correlated) with Shopify. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shopify has no effect on the direction of VTEX i.e., VTEX and Shopify go up and down completely randomly.

Pair Corralation between VTEX and Shopify

Given the investment horizon of 90 days VTEX is expected to under-perform the Shopify. In addition to that, VTEX is 1.12 times more volatile than Shopify. It trades about -0.05 of its total potential returns per unit of risk. Shopify is currently generating about 0.0 per unit of volatility. If you would invest  10,669  in Shopify on December 28, 2024 and sell it today you would lose (417.00) from holding Shopify or give up 3.91% of portfolio value over 90 days.

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

VTEX  vs.  Shopify

VTEX

Risk-Adjusted Performance

Very Weak

Over the last 90 days VTEX has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Shopify

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shopify has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Shopify is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with VTEX and Shopify

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

The idea behind VTEX and Shopify 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.