Correlation Between Ralph Lauren and Vipshop Holdings
Can any of the company-specific risk be diversified away by investing in both Ralph Lauren 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 Ralph Lauren and Vipshop Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ralph Lauren Corp and Vipshop Holdings Limited, you can compare the effects of market volatilities on Ralph Lauren 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 Ralph Lauren with a short position of Vipshop Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ralph Lauren and Vipshop Holdings.
Diversification Opportunities for Ralph Lauren and Vipshop Holdings
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ralph and Vipshop is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Ralph Lauren 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 Ralph Lauren 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 Ralph Lauren 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 Ralph Lauren i.e., Ralph Lauren and Vipshop Holdings go up and down completely randomly.
Pair Corralation between Ralph Lauren and Vipshop Holdings
Allowing for the 90-day total investment horizon Ralph Lauren Corp is expected to under-perform the Vipshop Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Ralph Lauren Corp is 1.42 times less risky than Vipshop Holdings. The stock trades about -0.35 of its potential returns per unit of risk. The Vipshop Holdings Limited is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest 1,660 in Vipshop Holdings Limited on January 23, 2024 and sell it today you would lose (100.00) from holding Vipshop Holdings Limited or give up 6.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ralph Lauren Corp vs. Vipshop Holdings Limited
Performance |
| Timeline |
| Ralph Lauren Corp |
| Vipshop Holdings |
Ralph Lauren and Vipshop Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ralph Lauren and Vipshop Holdings
The main advantage of trading using opposite Ralph Lauren and Vipshop Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ralph Lauren 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 Ralph Lauren Corp 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. Appian Corp | Vipshop Holdings vs. Okta Inc | Vipshop Holdings vs. MongoDB | Vipshop Holdings vs. Twilio 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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