Correlation Between Best Buy and Vipshop Holdings
Can any of the company-specific risk be diversified away by investing in both Best Buy and Vipshop Holdings 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 Best Buy and Vipshop Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Best Buy Co and Vipshop Holdings Limited, you can compare the effects of market volatilities on Best Buy and Vipshop Holdings 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 Best Buy with a short position of Vipshop Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Best Buy and Vipshop Holdings.
Diversification Opportunities for Best Buy and Vipshop Holdings
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Best and Vipshop is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Best Buy Co and Vipshop Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vipshop Holdings and Best Buy 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 Best Buy Co are associated (or correlated) with Vipshop Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vipshop Holdings has no effect on the direction of Best Buy i.e., Best Buy and Vipshop Holdings go up and down completely randomly.
Pair Corralation between Best Buy and Vipshop Holdings
Considering the 90-day investment horizon Best Buy Co is expected to generate 0.68 times more return on investment than Vipshop Holdings. However, Best Buy Co is 1.47 times less risky than Vipshop Holdings. It trades about -0.08 of its potential returns per unit of risk. Vipshop Holdings Limited is currently generating about -0.29 per unit of risk. If you would invest 7,859 in Best Buy Co on January 20, 2024 and sell it today you would lose (244.00) from holding Best Buy Co or give up 3.1% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Best Buy Co vs. Vipshop Holdings Limited
Performance |
| Timeline |
| Best Buy |
| Vipshop Holdings |
Best Buy and Vipshop Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Best Buy and Vipshop Holdings
The main advantage of trading using opposite Best Buy and Vipshop Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Best Buy position performs unexpectedly, Vipshop Holdings 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 Vipshop Holdings will offset losses from the drop in Vipshop Holdings' long position.The idea behind Best Buy Co and Vipshop Holdings Limited 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.| Vipshop Holdings vs. Shoe Carnival | Vipshop Holdings vs. Hibbett Sports | Vipshop Holdings vs. Citi Trends | Vipshop Holdings vs. Zumiez Inc |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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