Correlation Between Spectrum Brands and Vipshop Holdings

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Can any of the company-specific risk be diversified away by investing in both Spectrum Brands 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 Spectrum Brands and Vipshop Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Spectrum Brands Holdings and Vipshop Holdings Limited, you can compare the effects of market volatilities on Spectrum Brands 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 Spectrum Brands with a short position of Vipshop Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spectrum Brands and Vipshop Holdings.

Diversification Opportunities for Spectrum Brands and Vipshop Holdings

0.3
  Correlation Coefficient

Weak diversification

The 3 months correlation between Spectrum and Vipshop is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Spectrum Brands Holdings and Vipshop Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vipshop Holdings and Spectrum Brands 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 Spectrum Brands Holdings 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 Spectrum Brands i.e., Spectrum Brands and Vipshop Holdings go up and down completely randomly.

Pair Corralation between Spectrum Brands and Vipshop Holdings

Considering the 90-day investment horizon Spectrum Brands is expected to generate 3.52 times less return on investment than Vipshop Holdings. But when comparing it to its historical volatility, Spectrum Brands Holdings is 1.22 times less risky than Vipshop Holdings. It trades about 0.02 of its potential returns per unit of risk. Vipshop Holdings Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  997.00  in Vipshop Holdings Limited on December 29, 2023 and sell it today you would earn a total of  649.00  from holding Vipshop Holdings Limited or generate 65.1% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Spectrum Brands Holdings  vs.  Vipshop Holdings Limited

 Performance 
       Timeline  
Spectrum Brands Holdings 

Risk-Adjusted Performance

9 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Spectrum Brands Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Spectrum Brands may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Vipshop Holdings 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Vipshop Holdings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Spectrum Brands and Vipshop Holdings Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Spectrum Brands and Vipshop Holdings

The main advantage of trading using opposite Spectrum Brands and Vipshop Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spectrum Brands 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 Spectrum Brands Holdings 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.
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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.

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