Correlation Between Vipshop Holdings and Walgreens Boots

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

Diversification Opportunities for Vipshop Holdings and Walgreens Boots

-0.16
  Correlation Coefficient

Good diversification

The 3 months correlation between Vipshop and Walgreens is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Vipshop Holdings Limited and Walgreens Boots Alliance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walgreens Boots Alliance and Vipshop Holdings 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 Vipshop Holdings Limited are associated (or correlated) with Walgreens Boots. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walgreens Boots Alliance has no effect on the direction of Vipshop Holdings i.e., Vipshop Holdings and Walgreens Boots go up and down completely randomly.

Pair Corralation between Vipshop Holdings and Walgreens Boots

Given the investment horizon of 90 days Vipshop Holdings Limited is expected to generate 1.58 times more return on investment than Walgreens Boots. However, Vipshop Holdings is 1.58 times more volatile than Walgreens Boots Alliance. It trades about 0.06 of its potential returns per unit of risk. Walgreens Boots Alliance is currently generating about -0.05 per unit of risk. If you would invest  790.00  in Vipshop Holdings Limited on December 29, 2023 and sell it today you would earn a total of  856.00  from holding Vipshop Holdings Limited or generate 108.35% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Vipshop Holdings Limited  vs.  Walgreens Boots Alliance

 Performance 
       Timeline  
Vipshop Holdings 

Risk-Adjusted Performance

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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 recent stock price uproar, may contribute to short-horizon losses for the private investors.
Walgreens Boots Alliance 

Risk-Adjusted Performance

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Very Weak
Over the last 90 days Walgreens Boots Alliance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite sluggish performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in April 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Vipshop Holdings and Walgreens Boots Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Vipshop Holdings and Walgreens Boots

The main advantage of trading using opposite Vipshop Holdings and Walgreens Boots positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vipshop Holdings position performs unexpectedly, Walgreens Boots 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 Walgreens Boots will offset losses from the drop in Walgreens Boots' long position.
The idea behind Vipshop Holdings Limited and Walgreens Boots Alliance 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.

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