Correlation Between Costco Wholesale and Vipshop Holdings
Can any of the company-specific risk be diversified away by investing in both Costco Wholesale 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 Costco Wholesale and Vipshop Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Costco Wholesale Corp and Vipshop Holdings Limited, you can compare the effects of market volatilities on Costco Wholesale 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 Costco Wholesale with a short position of Vipshop Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Costco Wholesale and Vipshop Holdings.
Diversification Opportunities for Costco Wholesale and Vipshop Holdings
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Costco and Vipshop is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and Vipshop Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vipshop Holdings and Costco Wholesale 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 Costco Wholesale Corp 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 Costco Wholesale i.e., Costco Wholesale and Vipshop Holdings go up and down completely randomly.
Pair Corralation between Costco Wholesale and Vipshop Holdings
Given the investment horizon of 90 days Costco Wholesale Corp is expected to generate 0.48 times more return on investment than Vipshop Holdings. However, Costco Wholesale Corp is 2.07 times less risky than Vipshop Holdings. It trades about 0.17 of its potential returns per unit of risk. Vipshop Holdings Limited is currently generating about 0.01 per unit of risk. If you would invest 58,082 in Costco Wholesale Corp on January 25, 2024 and sell it today you would earn a total of 14,307 from holding Costco Wholesale Corp or generate 24.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Costco Wholesale Corp vs. Vipshop Holdings Limited
Performance |
| Timeline |
| Costco Wholesale Corp |
| Vipshop Holdings |
Costco Wholesale and Vipshop Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Costco Wholesale and Vipshop Holdings
The main advantage of trading using opposite Costco Wholesale and Vipshop Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Costco Wholesale 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.| Costco Wholesale vs. Walmart | Costco Wholesale vs. Dollar Tree | Costco Wholesale vs. BJs Wholesale Club | Costco Wholesale vs. Big Lots |
| Vipshop Holdings vs. Pinduoduo | Vipshop Holdings vs. Sea | Vipshop Holdings vs. MercadoLibre | Vipshop Holdings vs. Alibaba Group Holding |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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